Oil eases as weaker demand outlook counters Mideast supply concerns

Oil prices experienced a decline on Thursday, following earlier gains, as market focus shifted towards expectations of reduced global oil demand for the year. Brent futures dropped 42 cents, or 0.47%, to $88.56 a barrel, while U.S. crude, West Texas Intermediate (WTI), saw a 55 cents, or 0.66%, decrease to $82.72. This shift in sentiment came as there was no progress on resolving the dispute over the Strait of Hormuz, a vital shipping route.

A senior Iranian source revealed on Wednesday that no headway was made in negotiations to revive an interim deal reached in June and establish a timeline for implementation. The deadlock between the U.S. and Iran persisted, with both parties remaining entrenched in their positions, according to ING analysts.

On a separate note, a significant drone attack on Russia's Novorossiysk port did not appear to impact oil infrastructure, with no reports of damage to oil terminals as of the report's publication. The main driver of price increases over the past week, the prospect of reopening the Strait of Hormuz, remained unchanged.

U.S. commercial crude oil inventories surged to a 12-month high, with a record 17.4 million barrels added in the week ending August 7, according to data from the Energy Information Administration. This contrasted with analysts' expectations of a 1.4 million-barrel decrease. OPEC and the International Energy Agency (IEA) also released lower projections for global oil demand growth in 2026, with the IEA forecasting a 1.6 million bpd reduction this year.

Despite the lack of progress in resolving the Iran-U.S. conflict, the ongoing deadlock provided some support for oil prices. However, the tense situation in the Gulf has further exacerbated navigation safety concerns, prompting vessels to deactivate their signals, which hampers market transparency and makes it more challenging to gauge actual supply levels.