Oil Prices Extend Losses as Hormuz Deal Hopes and U.S. Stockpile Build Weigh on Markets

Crude oil prices edged lower in early trading on Wednesday, extending a multi-day slide as diplomatic efforts to de-escalate tensions in the Middle East eased supply concerns. The bearish sentiment was compounded by industry data indicating an unexpected build in U.S. crude stockpiles.

Diplomatic Efforts Ease Supply Fears

Optimism in the market grew following reports that an interim proposal has been drafted to restore safe navigation through the Strait of Hormuz, a critical chokepoint for global energy shipments. According to Qatar's government, which is mediating talks, the proposal aims to narrow differences between Washington and Tehran. The strait normally carries about one-fifth of the world's oil and liquefied natural gas.

The diplomatic push gained traction after U.S. President Donald Trump discussed de-escalation efforts with Qatar's Emir and stated that talks with Iran had commenced. However, Iran has publicly denied that formal negotiations are underway, highlighting the uncertainty that remains. The fragile security situation was underscored by another attack on a commercial vessel near the strait on Tuesday.

U.S. Inventories Add to Pressure

Adding to the downward pressure on prices, data from the American Petroleum Institute (API) released late Tuesday showed a surprise build in U.S. crude inventories. Key figures from the report include:

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• U.S. crude stockpiles rose by 2.69 million barrels for the week ended July 31.
• This contradicted analysts' expectations for a draw of approximately 2 million barrels.

Market participants are now awaiting official data from the U.S. Energy Information Administration (EIA) later on Wednesday to confirm the inventory trend. An EIA report confirming a build would reinforce concerns about weakening demand or oversupply.

Market Reaction

Following the news, both major oil benchmarks extended their recent losses. As of 20:54 ET (00:54 GMT), Brent crude futures for October delivery fell 0.3% to $79.12 per barrel, while West Texas Intermediate (WTI) crude futures for September delivery slipped 0.5% to $75.39 per barrel. The declines followed a sharp sell-off on Tuesday, where both benchmarks tumbled more than 5%.