Oil extended declines on Wednesday after steep falls in the previous two trading sessions, as investors waited to see if efforts to end the Iran war and restore traffic through the blockaded Strait of Hormuz were making progress.
Brent crude futures dropped 92 cents, or about 1.2%, to $78.44 a barrel by 0330 GMT. They have tumbled more than 12% for the week thus far.
U.S. West Texas Intermediate futures lost $1.07, or 1.4%, to stand at $74.70 a barrel and are down more than 11% this week.
Qatar said on Tuesday mediators were making progress in efforts to end the war, driving oil prices lower, although Tehran has denied U.S. President Donald Trump's assertion that talks are underway. Brent closed more than 5% lower on Tuesday below $80 a barrel for the first time since July 13.
"While the immediate geopolitical premium has unwound, the broader supply picture warrants caution," said Priyanka Sachdeva, head of market insights at Phillip Nova.
"If diplomatic efforts fail and physical supply is ultimately affected, the current pullback could prove short-lived, with tighter inventories amplifying the impact of any future supply shock," Sachdeva added.
Prior to the beginning of the war, some 20% of the world's oil and liquefied natural gas transited through the strait, and in March alone prices rose 50%.
"The main sticking point appears to be whether Iran will continue to insist on a degree of control over the waterway, and whether the U.S. will stand its ground and refuse that outcome," analysts from IG said in a note.
Trump and Qatar's Emir Sheikh Tamim bin Hamad Al Thani discussed efforts to narrow differences between Washington and Tehran and improve the prospects for a lasting settlement during a phone call on Tuesday, Qatar's Emiri office said.
U.S. crude and gasoline inventories rose while distillate stocks fell last week, market sources said on Tuesday, citing data from the American Petroleum Institute.
Crude stocks rose by about 2.7 million barrels in the week ended July 31, the sources said on condition of anonymity.
Official numbers from the U.S. Energy Information Administration are due at 10:30 a.m. ET (1430 GMT) on Wednesday.
