Story
Oil Prices Ease From 5% Rally on Reports of US-Iran Talks Over Strait of Hormuz
Summary
Oil prices retreated on Friday, pulling back from a sharp rally, after reports emerged of potential U.S.-Iran negotiations to reopen the Strait of Hormuz, easing some supply concerns.
Oil prices fell in early trading on Friday, paring the previous session's dramatic gains, as reports of diplomatic talks between the U.S. and Iran over the critical Strait of Hormuz tempered fears of a major supply disruption.
By 4:02 AM ET, the benchmark November Brent crude futures contract was down 0.4% at $106.15 a barrel. The U.S. West Texas Intermediate (WTI) crude contract for November delivery fell 1.1% to $93.62 per barrel.
Geopolitical Risks Drive Volatility
Both benchmarks had surged by more than 5% on Thursday, driven by escalating geopolitical tensions in the Middle East. The rally was triggered by an announcement from Saudi Arabia that it had successfully intercepted six ballistic missiles launched by Iran-backed Houthi rebels in Yemen.
The attacks, which targeted areas including the Red Sea coastal city of Yanbu, renewed investor concerns over the security of Saudi Arabia's oil infrastructure. Yanbu is a crucial export hub, and analysts at BMO Capital Markets noted that worries over Saudi supply are "re-emerging" as Red Sea oil exports have not fully recovered despite the restart of a key pipeline, while Houthi attacks continue to escalate.
Diplomatic Hopes Temper Gains
AdThe price surge cooled after media reports suggested that U.S. and Iranian negotiators in New York were discussing a path toward de-escalation. The potential deal would reportedly involve a phased reopening of the Strait of Hormuz by Iran in exchange for the U.S. lifting its economic blockade.
The Strait of Hormuz is a vital chokepoint for global oil shipments. According to Reuters, maritime traffic has been severely curtailed, with only 17 commodity vessels transiting the strait on a recent weekend, compared to a pre-war daily average of approximately 125.
US Inventory Data Provides Headwind
Partially offsetting the supply-side risks was recent data from the United States. Government figures for the week ending September 18 showed an unexpected increase in commercial crude inventories, which rose by 3 million barrels. This contrasted sharply with analyst forecasts for a draw of 641,000 barrels.
U.S. gasoline inventories fell by 1.7 million barrels, while distillate stockpiles, which include diesel, declined by 400,000 barrels. The diesel market remains in focus, with the source noting reports that the Trump administration was exploring measures to boost domestic supply amid record-high prices, including consulting with refiners on voluntary export limits.
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