Oil prices declined on Thursday as traders weighed the possibility of fresh diplomatic developments between the US and Iran against the risk of further supply disruptions from escalating attacks in the Middle East.Brent crude fell by $0.85, or 0.74%, to $114.50 a barrel, while US West Texas Intermediate (WTI) dropped $0.91, or 0.89%, to $101.90. The decline pared gains made in the previous session, when Brent advanced 1.3% and WTI climbed 3%.The prospect of a diplomatic breakthrough emerged after US vice president JD Vance sent a letter to Iranian security council chief Mohsen Rezaei in an effort to restart peace negotiations, the Wall Street Journal reported on Wednesday, citing US officials and people familiar with the matter.The possibility of further negotiations has offered some relief to oil markets, but the threat of an intensification in regional hostilities continues to weigh on the outlook for supplies. Concerns include renewed attacks by Yemen’s Houthis and the possibility that the US could launch an attack on Iran after its mid-term elections on November 3.
Houthi attacks keep supply concerns alive
Fresh developments in the conflict involving the Houthis and Saudi Arabia added to uncertainty on Thursday. The Saudi-led coalition fighting the group said it had intercepted and destroyed a ballistic missile fired towards the kingdom’s eastern region early in the day, with hostilities between the two sides showing no signs of easing.The latest incident followed an attack on Aden airport on Wednesday, according to Yemeni government forces. A day earlier, the Houthis had said they struck Saudi Arabia’s largest oil refinery with a missile, escalating their attacks against the world’s second-largest crude producer after the United States.Saudi authorities had not immediately confirmed the reported strike on the refinery, which has a capacity of 550,000 barrels per day.The continuing attacks have kept concerns over potential supply disruptions in focus even as diplomatic efforts offer the possibility of easing tensions.
Conflicting signals from US-Iran peace efforts
Efforts to find a way to end the war involving the US, Israel and Iran have produced mixed signals. An official briefed on the negotiations said Qatari mediators had presented Iran with a new draft agreement to end the conflict.However, a senior Iranian official rejected the proposals, describing them as unacceptable ideas that did not constitute an offer.Iran’s foreign minister said on Wednesday that Tehran was continuing to give diplomacy a chance to succeed. The minister also flagged the possibility of completing Iran’s seven-day plan in less than a week if it was adopted.The contrasting positions leave the prospects for a diplomatic resolution uncertain, while the possibility of renewed negotiations has contributed to the downward movement in crude prices.Meanwhile, US inventory data provided another factor for oil markets to follow. The US Energy Information Administration said that energy companies had withdrawn 1.9 million barrels of crude oil from storage during the week ended October 23.Gasoline inventories, however, increased by 3.9 million barrels, against analysts’ expectations of a decline of 900,000 barrels.The opposing movements in crude and gasoline stockpiles added to the mixed signals facing oil markets as traders assessed the impact of diplomatic developments, regional attacks and US inventory data on prices.
