Crude contracts fell sharply around midday Tuesday, on track for a third session of decline, weighed down by reduced risk premium in the petroleum complex amid optimism to restart Persian Gulf oil supply.

At 11:50 a.m. ET, September NYMEX West Texas Intermediate crude futures were down $3.15 to $79.40/bbl and October WTI was $2.75 lower at $77.50/bbl.

London-based ICE September Brent crude was down by $3.90 to $84.50/bbl and October Brent was $3.55 lower to $82.30/bbl.

Refined product futures outperformed crude. More-active September NYMEX RBOB was 3.3cts lower to $3.1365/gal and August RBOB was down 1.75ct to $3.3095/gal. September ULSD was 2.9cts lower to $3.9770/gal and August ULSD was down 0.05ct to $4.1065/gal.

Goldman Sachs analysts said in a note that reported talks between Iran and Oman to reopen the Strait of Hormuz could pave the way to resume U.S.-Iran talks.

However, the bank also cited Red Sea attacks over the past weekend by Yemen's Houthis rebels, who claimed to target Saudi oil infrastructure, including the kingdom's Jazan oil refinery and the Yanbu oil port.

"We still expect Brent to moderate to $80 by year-end if Hormuz fully reopens by Q4, but Red Sea disruptions and attacks on Saudi oil infrastructure may pose a new source of upside risk for crude and refined products prices," Goldman said.

In the spot market, Chicago physical gasoline bucked overall NYMEX futures weakness to trade 2-3cts/gal higher, helped by refiner buying on a weekend unit upset at Phillips 66's 370,900 b/d Wood River refinery in Illinois and reported issues at Citgo's 197,919 b/d Lemont, Ill., refinery.