Oil continues to decline amid hopes for negotiations in the Middle East
Kyiv • UNN
Brent and WTI fell by 0.5% amid negotiations concerning the Strait of Hormuz. U.S. distillate inventories fell to a seasonal low.
Oil prices fell on Thursday, extending a losing streak, amid expectations that talks between Iran and Qatar could reopen the Strait of Hormuz and ease supply disruptions caused by the war in the Middle East, UNN writes, citing Reuters.
Details
Brent crude futures fell 41 cents, or 0.5%, to $87.43 a barrel at 03:30 GMT (06:30 Kyiv time), marking the fourth consecutive day of declines. West Texas Intermediate crude futures fell 37 cents, or 0.5%, to $81.86, marking the fifth consecutive day of declines.
Iran and Oman are working to finalize the details of an agreement on control of the Strait of Hormuz, a senior Iranian source said on Wednesday, after Iran's Islamic Revolutionary Guard Corps said the two countries had agreed on procedures for using the waterway that connects the Persian Gulf's largest oil producers with markets and sources of revenue.
"Oil prices edged lower as the prospects of reopening the Strait of Hormuz improved amid ongoing negotiations," Daniel Hynes, senior commodities strategist at ANZ, said on Thursday, although he warned that "concerns about a shortfall in the oil market remain." Qatar's prime minister will travel to Iran on Thursday to resume diplomatic talks on ending the conflict, which has been ongoing for nearly six months.
The United States halted its attacks on Iran about a month ago and is seeking to intensify economic pressure on Iran, raising investors' expectations of an easing of supply disruptions from the Persian Gulf.
Nevertheless, the countries remain far apart in their demands for an end to the hostilities, and Iran is striking vessels in the Persian Gulf and the strait in an attempt to establish control over the waterway, the publication notes.
Iranian officials also said that the strait would not reopen unless the United States fulfills the terms of a temporary ceasefire agreement concluded in June but subsequently broken.
"At the heart of the dispute is still Iran's nuclear program, and it is unlikely to be resolved quickly… Iran also understands the importance of its geographic position and the leverage provided by the Strait of Hormuz, so the risk of prolonged uncertainty remains," said Priyanka Sachdeva, head of market analysis at Phillip Nova.
"As long as the risk of supply disruptions persists, some military security premium may continue to be priced into oil," she added.
Hynes of ANZ also pointed to the impact of the war in the Middle East and the Russia-Ukraine war on the diesel market. The conflict has damaged refineries in the Middle East, while several Russian refineries have also been hit, reducing exports from a company that was previously a major global diesel supplier.
The reduction in global diesel production is reflected in inventory data. The U.S. Energy Information Administration said on Wednesday that distillate inventories, including diesel fuel and heating oil, fell by 2.2 million barrels in the week to August 21, to 103.4 million barrels. Hynes said this was the lowest level of distillate inventories ever recorded for this time of year.
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