Oil prices sink on report of easing U.S. sanctions; IEA release plans in focus

Oil prices dropped significantly on Thursday after reports suggested the U.S. government might ease sanctions on oil shadow fleets. There was also a focus on an upcoming International Energy Agency (IEA) meeting, which could impact Europe's release of oil from its emergency stockpiles. Crude prices were also affected by the strengthening dollar following higher-than-expected U.S. consumer price index inflation data, which increased speculation of more interest rate hikes.

Brent oil futures fell 1.5% to $104.49 a barrel, while West Texas Intermediate crude futures decreased 1% to $94.14 a barrel. However, oil losses were offset by industry data showing U.S. oil inventories declined more than expected in the past week due to disruptions in production along the Gulf coast.

The strength of the dollar and higher U.S. inflation data added pressure to oil prices. Despite this, the decline was limited by the industry data highlighting the significant drop in U.S. oil inventories. The unexpected reduction in inventories was attributed to the interruption of Gulf coast production caused by Hurricane Isaias, which affected nearly two-thirds of Gulf production.

The IEA's meeting on Thursday will likely determine the pace at which Europe releases more oil from its emergency reserves. The agency has pledged to release 400 million barrels of oil from these reserves, but recent reports suggest a possible additional 100 million barrels. However, the release plans remain uncertain.

Ukraine's decision to resume attacks on Russian energy infrastructure after a brief pause added more potential disruptions in global fuel supplies. Meanwhile, data from the American Petroleum Institute (API) revealed a larger-than-expected drop in U.S. oil inventories by 11.12 million barrels in the week ending October 9, as Gulf coast production faced disruptions due to Hurricane Isaias.