Oil prices fell by more than $1 on Thursday, extending recent losses as investors weighed renewed diplomatic efforts involving Iran that could lead to the reopening of the Strait of Hormuz and ease concerns over global energy supplies.
Brent crude futures fell $1.36, or 1.55%, to $86.48 a barrel, putting the benchmark on course for a fourth consecutive session of losses. US West Texas Intermediate crude also declined $1.40, or 1.7%, to $80.83 a barrel, leaving it on track for a fifth straight day of losses.
Tim Waterer, chief market analyst at KCM, said renewed expectations of a diplomatic agreement were weighing on oil prices as traders anticipated a possible increase in tanker traffic through the strategic waterway.
He added that a broader reopening of the Strait of Hormuz could trigger further declines in crude prices, although oil prices were unlikely to return immediately to levels seen before the conflict.
Qatar’s prime minister is expected to travel to Iran on Thursday as part of renewed diplomatic efforts aimed at ending the conflict, which has lasted for almost six months.
Although fighting has largely subsided, negotiations have yet to produce a breakthrough, with Tehran and its counterparts still divided over the management of the Strait of Hormuz, a critical route for international energy shipments.
Before the conflict began in late February, the waterway carried roughly one-fifth of the world’s daily oil and liquefied natural gas supplies. Its disruption has consequently raised concerns over energy availability and contributed to volatility in global oil prices.
Shipping activity through the strait increased slightly on Wednesday, according to data, despite continued uncertainty over the security and accessibility of the route.
Meanwhile, a senior Iranian official said Iran and Oman were finalising arrangements for an agreement concerning control of the waterway. The development followed comments from Iran’s Revolutionary Guards that the two countries had reached an understanding on how the strait would be managed.
The United States has also maintained a pause in its attacks on Iran for about a month while continuing to pursue economic pressure on Tehran. The development has helped strengthen investor expectations that disruptions to Gulf energy supplies could gradually ease.
However, Priyanka Sachdeva, head of market insights at Phillip Nova, warned that significant uncertainty remains, citing Iran’s nuclear programme and the strategic importance of the Strait of Hormuz as key unresolved issues.
She said negotiations over Iran’s nuclear ambitions were unlikely to be resolved quickly, while Tehran remained aware of the strategic influence its geographic position gives it over one of the world’s most important energy transit routes.
Goodness Anunobi
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