Oil extends declines on hopes Mideast diplomacy could ease supply constraints

Oil prices continued to fall on Thursday, marking a fourth consecutive day of decline, as markets cautiously hoped for a diplomatic breakthrough in the Middle East to boost supplies. Brent oil futures slipped 0.5% to $87.37 a barrel, while U.S. West Texas Intermediate crude futures slipped 0.5% to $81.79 a barrel. Over the past week, Brent and WTI futures had dropped over 6%.

Optimism over a potential deal overshadowed ongoing tensions between the U.S. and Iran. The U.S. had imposed stricter economic sanctions on Iran and warned against trade with the country. However, reports emerged that a new ceasefire deal between Russia and Iran was imminent. Additionally, there were indications of progress in talks between Iran and Oman regarding commercial shipping routes through the Strait of Hormuz, though Tehran remained skeptical of an immediate reopening.

Pakistan, a key regional mediator, also reported advancements in peace negotiations with Iran. Despite these developments, shipping data indicated that the Strait of Hormuz still only accounted for a small fraction of pre-war crude flows, which previously supplied around 20% of global crude. Russia, a significant oil producer, reportedly planned to intensify attacks on Ukraine should peace talks stall.

Analysts noted that the Russia-Ukraine conflict had largely been sidelined by markets, and the focus had shifted to the Middle East situation.