Global oil prices fell by more than 1% on Thursday as hopes of progress in diplomatic efforts to resolve conflicts in the Middle East and between Russia and Ukraine eased concerns about potential supply disruptions. Rising OPEC+ production and increasing US crude inventories also added pressure to the market.
Brent crude futures declined by $1.47, or 1.58%, to $91.29 per barrel by 0426 GMT. US West Texas Intermediate (WTI) crude futures dropped $1.24, or 1.43%, to $85.29 per barrel.
The losses reversed gains recorded on Wednesday, when Brent rose 1.4% and WTI increased 0.6%, following a decline that had taken both benchmarks to two-month lows.
Peace Hopes Reduce Geopolitical Risk Premium
Investors became more optimistic about diplomatic efforts to reduce tensions in the Middle East and bring an end to the Russia-Ukraine war.
Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, said market expectations of behind-the-scenes efforts to secure a ceasefire between Russia and Ukraine had contributed to the decline. He also noted expectations that the conflict involving Iran was unlikely to escalate before next week’s US-China summit.
However, Kikukawa cautioned that uncertainty surrounding the Strait of Hormuz could prevent oil prices from experiencing a significant collapse.
Russian and Ukrainian negotiators agreed to a major prisoner exchange following two days of peace talks in Abu Dhabi. US mediators, however, said substantial differences remained over other issues, including territorial disputes. Ukrainian President Volodymyr Zelenskiy expressed hope that concrete progress towards resolving the war could be achieved this year.
Iran Conflict Continues to Influence Oil Markets
Developments involving Iran also remained an important factor for energy markets.
Iranian security chief Mohsen Rezaei said Tehran would not allow any enriched nuclear material to leave the country and warned that there would be consequences if the United States launched further strikes.
Oil Prices Rebound as Hormuz Shipping Attacks Threaten Iran Truce Hopes
Washington has maintained that nuclear issues must be included in any initial negotiations aimed at ending the eight-month-old conflict. However, US officials have played down the need for additional military action.
Despite hopes of diplomatic progress, uncertainty over the conflict and shipping activity through the Strait of Hormuz continues to influence expectations about global oil supplies.
Higher OPEC+ Output and US Inventories Add Pressure
Supply-side developments also contributed to the decline in crude prices.
OPEC+ oil production increased in October, driven largely by higher output from Saudi Arabia despite continued disruption to shipments through the Strait of Hormuz.
Meanwhile, US crude inventories increased by 9 million barrels in the latest week, according to market sources citing data from the American Petroleum Institute (API).
The increase added to concerns that global oil supplies could exceed demand. Investors were awaiting official inventory figures from the US Energy Information Administration, which were scheduled for release on Thursday after being delayed by a US public holiday.
The combination of easing geopolitical concerns, higher production and rising inventories has weighed on oil prices, although continued uncertainty in the Middle East remains a potential source of market volatility.
Source: The Express Tribune, Reuters.
