Oil prices fell over $1 on Thursday, driven by optimism surrounding potential peace talks in the Middle East and the Russia-Ukraine conflict. Brent crude futures dropped $1.14, or 1.2%, settling at $91.62 per barrel by 0141 GMT. Similarly, US West Texas Intermediate (WTI) crude futures decreased by $1.04, or 1.2%, to $85.49 per barrel.
These declines follow a rise in prices on Wednesday, where Brent increased by 1.4% and WTI by 0.6%, after both hit two-month lows earlier in the week. The market's response reflects expectations that behind-the-scenes efforts are underway to secure a ceasefire between Russia and Ukraine, as well as a belief that the conflict involving Iran is unlikely to escalate before the upcoming US-China summit.
Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, noted that while there is optimism about peace efforts, the uncertainty surrounding the Strait of Hormuz could prevent a significant market collapse. The Strait remains a critical chokepoint for global oil shipments, and any disruption could impact supply.
In recent developments, Russian and Ukrainian negotiators concluded two days of peace talks in Abu Dhabi on Wednesday, agreeing to a major prisoner exchange. However, US mediators indicated that significant differences remain on other critical issues, including territorial disputes. Ukrainian President Volodymyr Zelenskiy expressed hope for achieving concrete results in resolving the conflict by the end of the year.
Meanwhile, tensions with Iran persist as Iranian security chief Mohsen Rezaei declared that Iran will not permit any enriched nuclear material to leave the country. He warned of consequences should the US initiate new military strikes. Washington has emphasized that nuclear issues must be addressed in any negotiations aimed at ending the ongoing conflict, although US officials have downplayed the necessity for further military action.
On the production front, OPEC+ saw a rise in crude oil output in October, led by a significant increase from Saudi Arabia, despite ongoing disruptions in the Hormuz Strait. Additionally, US crude inventories rose by 9 million barrels last week, according to market sources citing data from the American Petroleum Institute. Official figures from the US Energy Information Administration are expected on Thursday, following a delay due to a national holiday.
