Global oil prices fell below $100 per barrel again on Thursday as hopes grew that the United States and Iran could reach an agreement that may eventually reopen the Strait of Hormuz.
Front-month Brent Crude futures dropped during morning trading in Europe, reversing earlier gains recorded in Asian markets.
The decline follows a sharp sell-off on Wednesday that pushed oil prices down by about 7%. Earlier on Thursday, both Brent and West Texas Intermediate (WTI) had risen nearly 1% amid concerns that a U.S.-Iran agreement may not happen as quickly as expected.
Despite the price drop, traders remain cautious because of the ongoing blockage at the Strait of Hormuz and declining global oil inventories, especially in the United States.
Oil prices had already started recovering late Wednesday after Donald Trump said it was still “too soon” for direct talks with Tehran.
Iranian officials also indicated that major disagreements remain unresolved, particularly over Iran’s nuclear programme.
By Thursday morning in Europe, Brent crude was down 1.8% at $99.45 per barrel, while WTI fell 2% to $93.18.
Reports suggest the U.S. has proposed a one-page memorandum that could lead to a gradual reopening of the Strait of Hormuz and ease restrictions on Iranian ports.
However, Iran is yet to review or respond to the proposal.
There is also no confirmed agreement on new mediated talks regarding Iran’s nuclear programme.
Commodity strategists at ING Group, Warren Patterson and Ewa Manthey, said Wednesday’s sell-off “partly unwinds the conflict-driven rally in energy prices, but losses were pared as the market remains cautious.”
They added that “Crude inventories in the US continue to tighten, while buyers have become more reliant on US barrels to offset disrupted Middle Eastern supply.”
