Oil prices decreased on Thursday as investors monitored diplomatic efforts to reopen the Strait of Hormuz, a critical waterway for global energy shipments. Brent crude futures fell 60 cents to $87.24 a barrel, marking a fourth consecutive day of losses, while West Texas Intermediate crude futures dropped 56 cents to $81.67, falling for the fifth day.
The price movement follows news that Qatar’s prime minister is scheduled to travel to Iran on Thursday to restart talks aimed at ending a conflict that has lasted nearly six months. Additionally, a senior Iranian source stated on Wednesday that Iran and Oman are working to finalize an agreement regarding control of the Strait of Hormuz, including how to share the waterway and its revenues.
The Strait of Hormuz previously carried oil and natural gas shipments equivalent to approximately 20% of global consumption. However, since the U.S.-Israeli conflict with Iran began on February 28, ship-tracking data indicates that oil flows through the strait have decreased to about one-quarter of their pre-war levels. Daniel Hynes, a senior commodity strategist at ANZ, noted that while the prospect of the strait reopening is pressuring prices lower, shortages in the oil market remain a concern.
The supply situation is further complicated by low global inventories of distillate fuels, such as diesel and heating oil. The U.S. Energy Information Administration (EIA) reported on Wednesday that distillate stockpiles fell by 2.2 million barrels to 103.4 million barrels for the week ending August 21. According to ANZ, this represents the lowest level ever recorded for this time of year. These shortages are attributed to refinery damage in the Middle East and Ukrainian strikes on Russian refineries, which have limited exports from major global suppliers.
Market participants are currently balancing the possibility of increased supply from a reopened strait against ongoing geopolitical tensions. While the U.S. has paused attacks on Iran for approximately one month to pursue economic pressure, Iranian officials have stated the waterway will not open unless the U.S. adheres to an interim ceasefire agreement reached in June. The visit by Qatar’s prime minister to Tehran on Thursday represents the next step in these negotiations, though the parties remain divided on specific demands to end the fighting.