Oil prices slipped on Thursday, giving back some of Wednesday's near-4% surge, as investors weighed Iran's willingness to continue talks against Tehran's refusal to guarantee safe passage through the Strait of Hormuz. Brent crude fell about 0.9% to $102.13 a barrel in early Asian trade, while West Texas Intermediate dropped roughly 0.7% to $91.56.
The pullback followed Wednesday's settlement at $103.08 for Brent and $92.16 for WTI, when Iranian President Masoud Pezeshkian's defiant speech at the UN revived fears of a prolonged conflict. Despite the easing, the market remains underpinned by the persistent threat to Hormuz, one of the world's most critical energy chokepoints.
Diplomacy caps the rally, but Hormuz keeps a floor under prices
Iran and the US remain far apart on the terms of any settlement, but Tehran is reviewing Washington's response to proposals that include lifting the naval blockade on Iranian ports and reopening Hormuz. TD Securities strategists Ryan McKay and Bart Melek noted that crude has become increasingly vulnerable to daily headlines as speculative positioning rises, and they caution against treating diplomatic signals as durable until a concrete agreement emerges.
The physical stakes are high. Hormuz is a vital artery for global oil shipments, and Iran has made access part of the negotiating process. That means progress in New York can strip several dollars of geopolitical premium from Brent, while a collapse in talks could rebuild it quickly.
Saudi pipeline restart eases crude stress, but not the diesel squeeze
Saudi Arabia has restarted its East-West pipeline at a reduced rate after this month's attacks, restoring an important route to the Red Sea that can bypass Hormuz. The system had recently rerouted about 4 million barrels a day, though full restoration could still take six to eight weeks. That return helps explain why Brent has struggled to hold Wednesday's spike.
Saudi exports are less constrained than they appeared earlier this month, and ship-to-ship transfers around Oman are also keeping barrels moving. However, refined products tell a different story. US diesel inventories remain exceptionally tight, and the Trump administration denied reports of a mandatory 90-day export ban. Energy Secretary Chris Wright said any effort to increase domestic supply would be voluntary and coordinated with refiners.
Republican lawmakers have nevertheless pushed for export restrictions as retail diesel prices remain above $6 a gallon, showing how crude can ease while the fuel market stays stressed.
Inventories and the dollar add another macro headwind
US crude inventories rose by 3 million barrels last week to 426.4 million, against expectations for a decline. Stocks at Cushing increased by 2.2 million barrels, while refinery utilisation fell to 94%. Gasoline and distillate inventories declined, reinforcing the split between comfortable crude stocks and tight fuel supply.
A firmer dollar is also limiting the upside. The greenback is near a two-month high after strong US data revived expectations for further Federal Reserve tightening, making dollar-priced commodities more expensive for overseas buyers.
Ukraine adds another swing factor. President Volodymyr Zelenskyy said Kyiv is prepared for an energy ceasefire with Russia if Moscow also stops attacking Ukrainian energy infrastructure.
This article is for informational purposes only and does not constitute financial advice.
