Global oil prices saw a rebound as Brent crude futures rose by 81 cents, or 0.77%, to $105.83 a barrel, and U.S. West Texas Intermediate futures increased by 97 cents, or 0.99%, to $99.23. This recovery follows a significant drop of over 5.6% on Wednesday after U.S. President Donald Trump indicated that negotiations with Iran were nearing completion, though he also issued threats of further attacks if no peace deal was reached.
The sharp decline in oil prices earlier this week was attributed to the potential breakthrough in U.S.-Iran talks, which could ease tensions in the Middle East. However, Iran's announcement of a new "Persian Gulf Strait Authority" and its control over the Strait of Hormuz has added complexity to the situation. The strait, a critical chokepoint for global oil and gas shipments, has been mostly closed due to the ongoing conflict.
The U.S. Energy Information Administration reported a record drawdown of nearly 10 million barrels from the Strategic Petroleum Reserve last week, highlighting the strain on global oil supplies. Additionally, commercial crude inventories fell by 7.9 million barrels to 445 million barrels, surpassing analysts' expectations of a 2.9 million-barrel draw.
“The sharp drop in oil prices appears to be pricing in the possibility of a breakthrough in the talks.”
Yang An, analyst at Haitong Futures
Gasoline inventories decreased by 1.5 million barrels, while distillates saw a slight increase of 372,000 barrels. The ongoing blockade of the Strait of Hormuz is expected to further deplete global refined-product and onshore crude inventories, potentially reaching their lowest levels in five years by late May and June.
Background
The geopolitical tensions and inventory drawdowns are likely to keep oil prices volatile in the coming weeks. Analysts are closely monitoring the situation, as any developments in the U.S.-Iran negotiations could significantly impact the global oil market.
The ongoing geopolitical tensions and inventory drawdowns are likely to keep oil prices volatile in the coming weeks. Analysts are closely monitoring the situation, as any developments in the U.S.-Iran negotiations could significantly impact the global oil market.
