Oil Prices Ease on Iran Diplomatic Signals, Surprise Rise in US Crude Stockpiles

Oil prices declined on Thursday, reversing a portion of the 4% gains from the previous session, as traders assessed signs of potential diplomatic progress between the U.S. and Iran alongside a bearish U.S. inventory report.

International benchmark Brent crude futures fell 0.9%, or 94 cents, to $102.13 a barrel, according to Reuters. West Texas Intermediate (WTI) futures, the U.S. benchmark, eased 0.7%, or 59 cents, to $91.56 a barrel.

Geopolitical Pressures Abate

The primary downward pressure on prices came after a senior Iranian official told Reuters that Iran remains open to diplomacy to end its war with the United States. The official noted that key Iranian priorities, including the lifting of a U.S. naval blockade and the reopening of the Strait of Hormuz, were discussed in indirect talks.

However, significant obstacles to a resolution persist. Iran's president told the UN General Assembly that Tehran would not surrender to U.S. pressure. This tougher stance was echoed by Iran's security chief, Mohsen Rezaei, who said the strait would not be reopened until Iran's conditions are met. U.S. Secretary of State Marco Rubio also noted that any deal would require extensive work and that military options remain available.

Surprise Build in US Inventories

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Adding to the bearish sentiment, the U.S. Energy Information Administration (EIA) reported that domestic crude inventories rose by 3.0 million barrels last week to 426.4 million barrels. This increase defied market forecasts, as analysts polled by Reuters had anticipated a 641,000-barrel draw.

A build in crude stockpiles can indicate either weaker-than-expected demand or stronger supply, both of which are typically negative for prices. The EIA report did note that fuel stocks fell.

Market Weighs Potential US Diesel Curbs

Traders are also monitoring conflicting signals from Washington regarding potential restrictions on diesel exports. Ultra-low-sulfur diesel futures fell about 5% after Politico reported the administration was planning a 90-day ban, a claim the White House denied.

However, Bloomberg later reported that Energy Secretary Chris Wright had told industry leaders to prepare for possible curbs. Analysts have warned that such a move could disrupt global energy supplies and may not be effective in lowering domestic prices.