Oil prices extend losses on expectations talks to ease Middle East supply woes

Oil prices continued to decline on Thursday, with further losses on the assumption that Iran and Qatar may soon reach an agreement to ease the Middle East supply disruptions. Brent crude futures dropped by 60 cents, or 0.7%, to $87.24 a barrel, marking a fourth consecutive day of decline. West Texas Intermediate crude futures also fell by 56 cents, or 0.7%, to $81.67, marking a fifth day of losses.

Iran and Oman are reportedly working on finalizing an agreement to control the Strait of Hormuz, a crucial waterway for Gulf oil producers. The strait, which once carried oil and natural gas shipments equal to about one-fifth of global consumption, has seen a significant reduction in flows to around one-quarter of pre-war levels due to the ongoing US-Israeli war on Iran.

Daniel Hynes, senior commodity strategist at ANZ, noted that crude oil prices edged lower as the prospect of the Strait of Hormuz reopening improved, but cautioned that concerns over oil market shortages persist. Qatar's prime minister is scheduled to visit Iran on Thursday to resume diplomatic talks aimed at resolving the conflict, which has been ongoing for nearly six months.

The US has temporarily halted its attacks on Iran and is seeking to impose greater economic pressure, leading to heightened expectations for an easing of Gulf supply disruptions. However, Iran and the other countries remain far apart on demands to end the fighting, and Iran has continued to strike shipping in the Gulf and strait to assert control over the waterway.

The Middle East war and the Russia-Ukraine war have also impacted the diesel market, with damages to refineries and reduced exports from Russia affecting global diesel supplies. The U.S. Energy Information Administration reported a decline in distillate stockpiles, including diesel and heating oil, to a record low for this time of year.