Crude Oil Slides Below $80 as Hormuz Reopening Hopes Ease Supply Fears

Crude oil prices extended their decline on Wednesday as growing expectations of diplomatic progress between the United States and Iran reduced concerns over prolonged supply disruptions in the Middle East.

Brent crude oil, the international benchmark for Nigerian crude oil, fell 0.4 percent to $79.04 per barrel in early trading, while U.S. West Texas Intermediate crude declined 0.8 percent to $75.19 per barrel. Both benchmarks had already fallen by more than 5 percent in the previous session, extending a sharp reversal from the elevated prices recorded in July.

The latest decline pushed Brent further below the $80 mark after the international benchmark closed beneath that level on Tuesday for the first time since July 13.

Oil markets have been responding to indications that diplomatic efforts could lead to an agreement capable of restoring more shipping activity through the Strait of Hormuz, one of the world’s most important energy transportation routes.

U.S. President Donald Trump said Washington had held productive discussions with Iran and expressed confidence that the Strait of Hormuz could reopen soon.

Qatar has also indicated that mediation efforts are making progress, although significant differences between Washington and Tehran remain unresolved.

The strait normally handles roughly one-fifth of global oil and liquefied natural gas shipments, making developments surrounding the waterway particularly important for crude prices.

Shipping activity remains substantially below normal levels despite signs of improvement. Ship-tracking data showed that eight vessels passed through the Strait of Hormuz on Tuesday, unchanged from the previous day. Before the conflict, daily traffic typically stood at around 130 to 140 vessels.

The market is nevertheless beginning to price in the possibility of a more meaningful recovery in oil flows.

Estimates cited by market analysts suggest traffic through Hormuz reached around 40 percent to 45 percent of pre-conflict levels last week.

A recovery to between 50 percent and 60 percent could be sufficient to revive concerns about excess supply in the international crude market.

The changing outlook has triggered a dramatic reversal in oil prices. Brent, which climbed as high as $102 per barrel in July, has now retreated into the upper-$70 range as traders remove part of the geopolitical risk premium previously embedded in prices.

Additional supply is also expected from the OPEC+ alliance.

The producer group agreed to increase production quotas by approximately 188,000 barrels per day from September, completing the phased reversal of 1.65 million barrels per day of voluntary cuts introduced in 2023.

However, the impact of previous OPEC+ increases has been limited by disruptions affecting exports from the Gulf, Russia and Kazakhstan, meaning higher production quotas have not always translated into equivalent increases in barrels reaching the international market.

Inventory data added another bearish signal for crude prices.

Preliminary industry figures indicated that U.S. crude inventories increased by approximately 2.7 million barrels in the week ended July 31, while gasoline stocks also rose.

Investors are awaiting official inventory figures from the U.S. Energy Information Administration for confirmation of the trend.

Despite the steep decline, supply risks have not disappeared.

The Strait of Hormuz remains heavily disrupted, while instability around the Red Sea continues to complicate tanker movements. Any breakdown in diplomatic efforts or renewed military escalation could quickly restore a geopolitical premium to crude prices.

The sharp decline has wider implications for oil-exporting countries such as Nigeria. Prices near $80 remain supportive of petroleum export earnings, but a sustained move deeper into the $70 range would reduce the revenue windfall created when Brent traded above $100 in July.

For Nigerian producers, the development also comes as the country seeks to increase crude production and diversify exports through newer grades such as Cawthorne, Nembe and Utapate alongside established streams including Bonny Light.

The immediate direction of crude prices will therefore depend heavily on whether negotiations translate into a durable reopening of the Strait of Hormuz.

If shipping flows continue recovering while OPEC+ adds production, concerns about global oversupply could exert further pressure on prices.

Conversely, renewed disruption in the Middle East could quickly reverse the current decline and return supply security to the centre of the oil market.