Oil markets recovered on Thursday, with prices climbing more than 1% after steep losses in the previous session, as investors continued to monitor uncertainty surrounding peace negotiations between the United States and Iran while falling inventories and supply concerns provided additional support.
By 06:18 GMT, Brent crude futures were up US$1.27, or 1.21%, at US$106.29 per barrel, while U.S. West Texas Intermediate crude futures gained US$1.29, or 1.31%, to US$99.55 per barrel.
Both benchmarks had plunged more than 5.6% on Wednesday to their lowest levels in over a week after President Donald Trump said negotiations with Iran were in the “final stages,” although he also warned that additional attacks could follow if Tehran refused to accept a peace agreement.
“The oil market remains overly sensitive to Iran-related headlines, with participants continuing to pin considerable hope on reports that talks between the U.S. and Iran are progressing,” ING analysts said in a note Thursday.
“We’ve been in this situation multiple times before, which ultimately led to disappointment,” they added, while forecasting an average Brent crude price of US$104 per barrel during the current quarter.
Iran responded by warning against further military action and announced new measures aimed at strengthening its control over the Strait of Hormuz, the strategic maritime passage that before the conflict handled oil and liquefied natural gas shipments equivalent to around 20% of global demand.
On Wednesday, Tehran announced the creation of a new “Persian Gulf Strait Authority,” stating that a “controlled maritime zone” would be enforced within the Strait of Hormuz.
Iran effectively shut the strait following U.S. and Israeli strikes that triggered the conflict on February 28. Although most military activity has eased since a ceasefire was reached in April, Iran continues restricting maritime traffic through Hormuz while the United States maintains a blockade along Iran’s coastline.
The disruption to supplies from the critical Middle Eastern energy-producing region has forced governments to draw heavily on both strategic and commercial reserves, increasing concerns over rapidly shrinking inventories.
According to the U.S. Energy Information Administration, the United States withdrew nearly 10 million barrels from its Strategic Petroleum Reserve last week, marking the largest weekly drawdown on record.
Additional support for crude prices came from EIA data showing a sharper-than-expected decline in U.S. oil inventories, reinforcing concerns about ongoing supply disruptions.
“The drawdown in oil inventories will make it difficult for oil prices to remain low,” said Mingyu Gao, chief researcher for energy and chemicals at China Futures.
“With the Strait of Hormuz blocked, global refined-product and onshore crude inventories are expected to fall below their lowest levels for this time of year in the past five years by late May and late June.”
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