Oil prices edge lower on Wednesday

Oil prices edged lower on Wednesday, extending losses from the previous two sessions as investors weighed the impact of a US-Iran peace agreement that could restore oil flows through the Strait of Hormuz, while uncertainty over the full resumption of shipping limited further declines.

Brent crude futures fell 0.2 per cent to $78.80 a barrel by 0340 GMT, while US West Texas Intermediate (WTI) crude slipped 0.3 per cent to $75.80 a barrel. Both benchmarks had dropped around 5 per cent on Tuesday, reaching three-month lows on expectations that the agreement would ease disruptions to global energy supplies.

The proposed deal would see the United States lift restrictions on Iranian ports in exchange for Tehran allowing tanker traffic through the Strait of Hormuz, a key route that normally handles about one-fifth of global crude oil and liquefied natural gas shipments.

Market analysts said traders were removing much of the geopolitical risk premium from oil prices, but remained cautious as tanker traffic has yet to fully recover and details of the agreement are still emerging. Concerns also persist over regional stability after Israel distanced itself from the latest US-Iran pact.

Meanwhile, data showing a larger-than-expected 8.3 million-barrel draw in US crude inventories provided some support to prices, while weaker refining activity in China highlighted concerns over global demand.

Attribution: Reuters