Oil drops on lower demand forecasts despite deadlock in US-Iran talks

Oil prices dropped more than 2% on Thursday, reversing a week-long upward trend, as investors focused on weaker global demand and a significant increase in U.S. crude inventories. Both Brent and U.S. crude futures contracts experienced a loss after previously falling over 3.5%. Brent futures closed at $87.07 a barrel, down 2.15%, while U.S. West Texas Intermediate (WTI) crude finished at $81.25 a barrel, down 2.4%.

The decline was attributed to data from the U.S. Energy Information Administration showing a record-high U.S. commercial crude oil inventory increase of 17.4 million barrels to 424.4 million in the week ended August 7. OPEC lowered its global oil demand growth forecast for 2026 to 580,000 barrels per day, and the International Energy Agency (IEA) projected a 1.6 million bpd decline in consumption this year, due to higher prices and supply restrictions from the U.S.-Iranian conflict.

A report from Yemen's Houthi-run Saba news agency claimed the militant group attacked a Saudi Aramco refinery in Jazan with two drones, renewing concerns about potential supply disruptions in an already tight market. Aramco's website stated the Jazan refinery can produce 250,000 bpd of ultra-low sulfur diesel. The Houthi military source blamed Saudi violations of Yemeni airspace and sovereignty for the attack.

Supply disruptions in the Middle East and the Black Sea region continue to support oil prices. Iran and the U.S. argue over control of the Strait of Hormuz, through which about 20% of global oil supply once passed. Iran claims total control, while the U.S. asserts it has control. Traders are closely monitoring the situation as vessel crossings through the strait dropped to five on Wednesday, their lowest in three weeks.