Oil prices dropped in early trade on Thursday after Qatar announced that Iran and the United States made 'positive progress' in indirect talks that concluded on Wednesday. The discussions focused on the Strait of Hormuz, a critical passage for a fifth of the world's oil supplies before the war.
The Brent crude futures fell 73 cents, or 1.02%, to $70.84 per barrel by 01:02 GMT, while U.S. West Texas Intermediate crude dropped 83 cents, or 1.21%, to $67.75 per barrel.
Both indices fell over 1% in the previous session to their lowest levels in four months.
Sources reported that U.S. and Iranian negotiators spent two days in Doha discussing maritime navigation in the Strait of Hormuz and the unfreezing of Iranian assets.
Despite the partial resumption of navigation, the two countries exchanged blows days ago following an Iranian attack on a cargo ship.
Two senior Iranian sources stated that Iran remains determined to gain international recognition of its control over the strait, even if it needs to use force. Tehran has repeatedly affirmed it will impose transit fees on ships starting mid-August, following the expiration of a fee exemption period outlined in the initial agreement.
Tanker traffic through the strait has begun to recover, and U.S. Vice President J.D. Vance said the flow of oil through the waterway has returned to pre-war levels without providing figures.
Haitong Futures noted in a memo that with the strait remaining open and crude oil flowing from it, market competition continues to drive oil prices down, with growing expectations of a supply surplus.
Supply is expected to increase further after sources indicated on Wednesday that OPEC+ oil-producing countries are likely to agree to a further increase in production targets in their Sunday meeting, starting from August.
The production target is expected to increase by about 188,000 barrels per day for August.
In the United States, crude inventories fell by 3.8 million barrels to 408.4 million barrels last week, the lowest since September 2018, according to the Energy Information Administration on Wednesday.
However, this fall was less than analysts' expectations in a Reuters poll, which projected a decline of 4.5 million barrels.