Oil prices fall as investors weigh supply outlook, Middle East tensions

Oil prices plummeted over $1 in early trading on Thursday as traders evaluated the threat to supply from attacks on shipping lanes and US efforts to reduce petroleum costs by easing sanctions. Brent crude futures dropped $1.39, or 1.31%, to $104.67 per barrel, while West Texas Intermediate crude fell $1.02, or 1.07%, to $94.07, reversing earlier gains.

The decline came after the Houthis targeted Saudi Aramco headquarters and Iran announced new tactics aimed at ships in the Strait of Hormuz, which has seen a spike in attacks over the past 10 days. Iran claimed it was escalating strikes in response to the US blockade and stricter sanctions introduced in the previous month. The US is reportedly considering easing sanctions on so-called shadow fleet vessels transporting oil from Russia, Iran, and Venezuela to help lower prices.

Meanwhile, increased output from Russia and Gulf producers has helped keep prices stable. Russia's crude production rose by 65,000 barrels per day in September to 8.43 million barrels per day (bpd), though it remained 870,000 bpd below last year's levels. The International Energy Agency (IEA) reported that crude exports from Middle East Gulf producers increased by 4.4 million bpd in September to nearly 75% of prewar capacity.

In the US, crude oil and distillate inventories declined last week, while gasoline stocks rose, according to data from the American Petroleum Institute. However, the sharp inventory draw did little to spur oil prices, suggesting investors remain cautious about future price movements.