Oil prices advanced roughly 2% on Thursday, with Brent crude futures returning above the $105 mark as diplomatic efforts between the United States and Iran failed to show meaningful progress. The lack of a breakthrough kept geopolitical risk firmly on the radar for energy traders.
Brent crude futures settled 2.09% higher at $105.2 per barrel, after touching an intraday high of $106.50 earlier in the session. West Texas Intermediate (WTI) futures also gained 2.05%, reaching $94.13 a barrel.
The market continues to be underpinned by uncertainty surrounding the conflict and its potential impact on global energy supplies. However, the uninterrupted flow of oil through the Strait of Hormuz and the restart of Saudi Arabia's East-West pipeline have helped alleviate some physical supply pressures.
US-Iran talks remain stalled
The United States and Iran remain at odds over how to resolve their conflict. A senior Iranian official told Reuters that Tehran is reviewing Washington's response to its peace proposals, which include lifting the US naval blockade of Iranian ports and reopening the Strait of Hormuz. Earlier reports indicated that Iran had given the US one week to meet its publicly stated demands, including the removal of the naval blockade.
Iranian President Masoud Pezeshkian, speaking at the United Nations General Assembly, reiterated that Tehran would not yield to US pressure. Additionally, an adviser to Iran's Supreme Leader, Mojtaba Khamenei, warned that Tehran could expand the Middle East conflict into the Indian Ocean if the US or Israel launches another attack, according to an AFP report citing Iran's Fars news agency.
Peter Cardillo of Spartan Capital noted in a WSJ report that crude oil remains in strong demand because there is still no evidence of a diplomatic breakthrough that would bring the parties back to negotiations. MUFG analyst Soojin Kim added that continued flows through Hormuz and the Saudi pipeline restart could ease physical supply pressures, but persistent tanker attacks and limited diplomatic progress could keep volatility and the geopolitical risk premium elevated.
Diesel export uncertainty adds to market concerns
European diesel futures moved lower from their all-time highs on Thursday as markets assessed reports of a possible US ban on diesel exports. A White House official denied a report that the US was preparing a 90-day diesel export ban. The European Commission expressed concern over the reported plans, warning that such a measure could have a negative impact on both sides.
Analysts and market watchers have said a US diesel export ban would do little to reduce high energy prices and could instead worsen global supplies and further disrupt economies. The physical oil market also remains unsettled. Priyanka Sachdeva, head of market insights at Phillip Nova, said in a Reuters report that the physical market was nowhere near fully normalised.
Sachdeva added that Brent carries a larger geopolitical and sea-route premium because international crude is more exposed to Middle East and Hormuz disruptions, while WTI benefits more from relatively insulated US supply.
US inventories show mixed signals
US distillate stockpiles, including diesel and heating oil, fell by 428,000 barrels to 107.4 million barrels last week, according to Energy Information Administration data. US crude inventories, meanwhile, increased by 3 million barrels to 426.4 million barrels. Analysts polled by Reuters had expected a 641,000-barrel decline.
This article is for informational purposes only and does not constitute financial advice.
