Oil markets traded lower on Thursday after a renewed ceasefire agreement between Israel and Lebanon reduced some geopolitical anxiety, although declining U.S. inventories continued to highlight underlying supply concerns.
Brent crude fell 1.5% to $96.30 per barrel, while WTI crude lost 1.2% to trade at $94.84 per barrel.
The decline followed a strong advance earlier in the week that had lifted both benchmarks to their highest levels in more than seven days.
Diplomatic Progress Brings Temporary Relief
Investors continued to monitor the conflict involving Iran, Israel and the United States, which remains a major driver of energy market volatility.
Recent military activity included reported Iranian attacks targeting Gulf infrastructure and U.S. operations near the Strait of Hormuz, while Israeli forces maintained pressure on Hezbollah positions in southern Lebanon.
A ceasefire agreement announced on Wednesday between Israel and Lebanon provided some optimism that regional tensions may begin to ease. The arrangement remains conditional on Hezbollah ending military operations, although the group did not participate directly in the negotiations.
Despite the agreement, broader talks between Washington and Tehran remain stalled, leaving uncertainty over the future of regional oil exports and maritime traffic through the Strait of Hormuz.
Sentiment improved somewhat after President Donald Trump suggested that Iran had agreed not to pursue nuclear weapons and indicated that additional military action would be avoided unless U.S. personnel were harmed.
Political developments in Washington also attracted attention after the House of Representatives approved a measure aimed at limiting further military involvement, though significant legislative hurdles remain.
“Every day that passes without a resumption of oil flows leaves the market increasingly vulnerable. This increases the pressure to strike a deal,” ING analysts wrote.
Inventory Data Highlights Tight Supply Conditions
Supporting the market was a larger-than-anticipated decline in U.S. crude stockpiles.
According to the Energy Information Administration, inventories fell by 8 million barrels during the latest reporting week, far exceeding expectations for a drawdown of roughly 3 million barrels.
“While inventories do fall seasonally as refiners ramp up operating rates, the pace of decline has been faster than usual,” ING noted.
Strong export demand also contributed to tighter conditions, with U.S. crude exports reaching 5.9 million barrels per day as international buyers sought alternatives amid supply disruptions elsewhere.
Analysts continue to monitor global inventory levels closely, warning that sustained stock draws could leave the market increasingly exposed to supply shocks ahead of peak seasonal demand.
While ceasefire developments have reduced some immediate geopolitical pressure, underlying supply fundamentals continue to offer significant support to oil prices.
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