Oil prices fell on Thursday, giving up part of the previous session’s gains as hopes of renewed diplomatic negotiations between the United States and Iran eased concerns about potential disruptions to Middle East oil supplies.
Brent crude futures dropped $1.22, or 1.1%, to $114.10 a barrel at 0351 GMT. US West Texas Intermediate (WTI) crude futures fell $1.33, or 1.3%, to $101.45 a barrel.
Both benchmarks had risen on Wednesday, with Brent gaining 1.3% and WTI advancing 3%.
Hopes for US-Iran Talks Weigh on Oil Prices
Market sentiment improved after reports that Washington was exploring diplomatic options to revive negotiations with Tehran.
The Wall Street Journal reported on Wednesday that US Vice President JD Vance had sent a letter to Iranian security chief Mohsen Rezaei in an effort to restart peace negotiations. The report cited US officials and people familiar with the matter.
Yuki Takashima, an economist at Nomura Securities, said selling pressure was prevailing amid expectations that peace talks could resume, although the decline in prices remained limited.
Uncertainty over the future of the conflict continues to influence traders, with concerns that diplomatic efforts could fail and military action could resume.
Houthi Attacks Raise Regional Supply Concerns
Fears of further escalation in the Middle East limited the decline in oil prices.
The Saudi-led coalition fighting Yemen’s Houthis said it destroyed a ballistic missile fired towards Saudi Arabia’s eastern region early on Thursday.
Yemeni government forces also said the Houthis had attacked Aden airport on Wednesday.
The latest developments followed a Houthi claim a day earlier that the group had struck Saudi Arabia’s largest oil refinery with a missile. Saudi authorities had not immediately confirmed the reported strike on the facility, which has a processing capacity of 550,000 barrels per day.
The attacks have heightened concerns about the security of regional energy infrastructure and the possibility of further disruptions to oil supplies.
Market participants are also monitoring the risk of renewed US military action against Iran following the American midterm elections scheduled for November 3.
Oil Prices Rise After Attack on Saudi Refinery Revives Supply Fears
Qatar Leads Efforts to Secure Peace Agreement
Diplomatic efforts are continuing as regional countries attempt to prevent a renewed war involving Iran, the United States and Israel.
A Qatari-led mediation initiative has presented Tehran with a new draft agreement aimed at ending the conflict, according to an official briefed on the negotiations.
However, a senior Iranian official dismissed the proposals as unacceptable, saying they did not amount to a formal offer.
Iranian Foreign Minister Abbas Araghchi said on Wednesday that Tehran continued to give diplomacy an opportunity to succeed. He also indicated that Iran’s seven-day plan could be implemented in less than a week if its conditions were accepted.
The competing positions suggest that negotiations remain uncertain despite efforts by regional mediators to establish a workable agreement.
Expectations of Higher Russian Oil Output Add Pressure
Expectations of increased crude oil and diesel production in Russia also weighed on market sentiment.
JPMorgan analysts said there had been no further confirmed attacks on Russian refining infrastructure since the October 15 strike on the Ryazan refinery.
According to the analysts, the absence of additional confirmed attacks had allowed Russian refinery processing rates to recover by 350,000 barrels per day during the previous week, reaching 4 million barrels per day.
They added that higher refinery activity could allow Russia to increase crude production by a broadly comparable amount, reversing part of a recent decline that had pushed output to 8.4 million barrels per day, its lowest level since 2003.
However, the analysts cautioned that increased production would not necessarily translate into higher crude exports.
US Crude Inventories Fall While Gasoline Stocks Rise
Separate data from the US Energy Information Administration also influenced market expectations.
The agency reported on Wednesday that US energy companies withdrew 1.9 million barrels of crude oil from storage during the week ended October 23.
The withdrawal contrasted with analysts’ expectations of a 15,000-barrel increase in crude inventories, according to a Reuters poll.
However, gasoline inventories rose by 3.9 million barrels, compared with market expectations of a 900,000-barrel decline.
The contrasting inventory figures provided mixed signals about US fuel demand and supply conditions.
Oil markets are likely to remain sensitive to developments in US-Iran negotiations, attacks on regional energy infrastructure, Russian production levels and upcoming US inventory data. While diplomatic progress could ease some of the pressure on prices, any renewed military escalation could quickly revive concerns about global oil supplies.
