Oil prices retreated on Thursday as traders digested a mixture of diplomatic movement around the Strait of Hormuz and fresh U.S. supply data that undercut near-term demand expectations.
As of 21:02 ET (01:02 GMT), October Brent futures were trading at $79.28 per barrel, down about 0.2%. West Texas Intermediate crude for the front month fell roughly 0.4% to $74.90 per barrel. Both contracts finished little changed on Wednesday but were positioned for weekly declines exceeding 10%.
Market tone was helped by an announcement that Iran and Oman had agreed on the coordinates for a proposed shipping lane through the Strait of Hormuz - the chokepoint that handles roughly a fifth of global oil and liquefied natural gas trade. The development eased some concern about prolonged disruptions to tanker traffic that had been pushing prices higher in prior sessions.
Despite that limited diplomatic progress, participants cautioned that the move did not represent a full reopening of the strait. Important questions remain open, including discussions over cargo fees, inspection procedures and wider security arrangements, and there is uncertainty over whether any package can be put into effect in full.
At a campaign rally in Las Vegas on Wednesday, U.S. President Donald Trump said Washington was engaged in talks with Tehran and added he would "see what happens" regarding the ongoing negotiations. Iran, however, has publicly denied that peace talks with the United States are taking place.
Analysts noted that a geopolitical risk premium has not evaporated - setbacks in talks and the difficulty of implementation mean the premium could reassert itself if progress stalls.
Further constraining gains in oil prices were U.S. government figures showing an unexpected build of about 2.5 million barrels in crude inventories last week. The market had been looking for a drawdown of roughly 1.5 million barrels, and the surprise stockpile increase suggested softer near-term demand pressure. Inventories at the Cushing, Oklahoma delivery hub also rose, adding downward pressure on prices.
Regional security risks outside the Hormuz negotiations stayed elevated. Houthi attacks on vessels in the Red Sea, ongoing fighting affecting Russian and Ukrainian maritime trade, and disruptions to Kazakhstan's principal export route were cited as reminders that threats to global energy supplies persist even as optimism about traffic through Hormuz improves.
In sum, traders are navigating competing forces - modest diplomatic progress on a critical shipping lane that could ease supply concerns versus renewed evidence of ample U.S. crude stockpiles and continued instability in other maritime corridors.
Market impact
- Prices: Brent and WTI slipped modestly, remaining on track for steep weekly losses.
- Supply indicators: An unexpected U.S. crude inventory build and higher Cushing stocks pressured prices.
- Geopolitics: Agreement on Hormuz coordinates provided some relief but did not eliminate broader regional risks.