Global oil prices fell on Thursday as renewed diplomatic efforts between the United States and Iran raised hopes of progress towards ending the conflict, easing concerns over potential disruptions to energy supplies in the Middle East.
Brent crude futures declined by $1.22, or 1.1 per cent, to $114.10 per barrel, while US West Texas Intermediate (WTI) crude futures dropped by $1.33, or 1.3 per cent, to $101.45 per barrel in early trading.
The declines followed gains in the previous session, when Brent rose by 1.3 per cent and WTI climbed by three per cent amid concerns over escalating regional hostilities and potential disruptions to energy supplies.
Market sentiment improved following reports that US Vice-President JD Vance had sent a letter to Iranian Security Council chief Mohsen Rezaei as part of efforts to explore renewed diplomatic engagement.
Qatari mediators have also presented Iran with a draft proposal aimed at ending the war involving the United States and Israel. However, a senior Iranian official dismissed the proposals as unacceptable ideas that did not constitute a formal offer, highlighting the challenges facing negotiators.
Yuki Takashima, an economist at Nomura Securities, said expectations of renewed negotiations were influencing market movements.
“Selling pressure is prevailing amid expectations that peace talks may resume,” Takashima said. “However, the decline remains limited.”
Despite the diplomatic developments, concerns about further escalation continued to support oil prices.
Yemen’s Houthi movement has also intensified attacks in the region, raising fears that the conflict could threaten oil production, refining operations and transportation routes across the Middle East.
The Saudi-led coalition fighting the Houthis said it had intercepted a ballistic missile fired towards the kingdom’s eastern region early on Thursday. Yemeni government forces also reported an attack on Aden airport on Wednesday.
The Houthis had previously claimed to have struck Saudi Arabia’s largest oil refinery with a missile, although Saudi authorities had not immediately confirmed the reported attack.
Meanwhile, expectations of recovering Russian refinery activity have added another factor influencing market sentiment.
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JPMorgan analysts said Russian refining operations had rebounded following a period without further confirmed attacks on the country’s refining infrastructure.
“Since the October 15 strike on the Ryazan refinery, there have been no further confirmed attacks on Russian refining infrastructure,” the analysts said in a note. “The silence has allowed Russian refinery runs to rebound by 350 kbd last week to 4 mbd.”
The figures indicate that Russian refinery operations recovered by approximately 350,000 barrels per day to four million barrels per day last week.
The analysts also noted that increased refinery activity could allow Russian crude production to recover, although higher production would not necessarily translate into increased crude exports.
Additional uncertainty surrounds the possibility of renewed US military action against Iran following the American midterm elections scheduled for November 3.
Any escalation could disrupt regional energy supplies and push prices higher, while a credible diplomatic agreement could ease concerns about prolonged supply disruptions.
Meanwhile, data from the US Energy Information Administration showed that American crude inventories fell by 1.9 million barrels in the week ended October 23. However, gasoline inventories increased by 3.9 million barrels, contrary to analysts’ expectations of a decline.
The mixed inventory figures added another factor for traders assessing the balance between energy demand, available supplies and geopolitical risks.
With diplomatic efforts continuing alongside regional hostilities, oil markets remain sensitive to developments in US-Iran relations, attacks on energy infrastructure and changes in Russian refining activity.
