Oil prices fell for a second day on Wednesday on expectations that peace talks between the US and Iran may resume and eventually release supply from the key Middle East producing region trapped by the closure of the Strait of Hormuz.
Brent crude futures fell 52 cents, or 0.55%, to $94.27 a barrel at 0054 GMT after falling 4.6% in the previous session. US West Texas Intermediate crude was down $1.04, or 1.1%, to $90.24 after dropping 7.9% the session before.
Talks to end the war between the US and Israel and Iran could resume in Pakistan over the next two days, US President Donald Trump said on Tuesday, after the collapse of negotiations over the weekend prompted Washington to impose a blockade on Iranian ports.
This has increased optimism that talks could eventually settle the conflict and open up crude oil and fuel flows.
The war has shut the Strait of Hormuz, a key waterway for crude and refined product flows out of the Gulf to global buyers, particularly in Asia and Europe.
Despite a two-week ceasefire, transit through the strait remains uncertain, with traffic at only a fraction of the 130 or so vessels that moved through the waterway before the war, sources said on Tuesday.
A US destroyer stopped two oil tankers from leaving Iran on Tuesday, a US official said.
"While diplomatic headlines suggest the possibility of renewed US-Iran talks and even a temporary easing of transit restrictions, the physical reality remains fragmented," the Schork Group said in a note.
"The result is a market that continues to price optionality around flow disruption rather than a return to equilibrium."
The market stands to lose some access to further supply after two US administration officials told Reuters on Tuesday the US will not renew a 30-day waiver of sanctions on Iranian oil at sea that expires this week, and quietly let a similar waiver on sanctions on Russian oil expire over the weekend.
Later in the day, markets will be watching for official US inventory data from the Energy Information Administration due at 10:30am ET (1430 GMT).
US crude oil stockpiles were expected to have risen slightly last week, while distillate and gasoline inventories likely fell, a Reuters poll showed.
Market sources familiar with American Petroleum Institute figures said on Tuesday US crude oil inventories jumped for the third straight week.
