Crude oil prices recovered Thursday after experiencing two consecutive days of declines, driven by ongoing supply worries stemming from unclear prospects for ending the Iran conflict and significant inventory reductions that have sparked fears about depleting global reserves.
Brent crude futures climbed 81 cents, representing a 0.77% increase to reach $105.83 per barrel by 0055 GMT, while U.S. West Texas Intermediate futures gained 97 cents, up 0.99% to $99.23.
Both oil benchmarks had fallen more than 5.6% Wednesday following comments from U.S. President Donald Trump indicating that discussions with Iran had reached their final phases, though he also issued warnings of additional military action should Iran reject a peace agreement.
Iran responded with warnings against further military strikes and revealed measures strengthening its grip on the vital Strait of Hormuz shipping lane, which previously transported oil and liquefied natural gas equivalent to roughly 20% of worldwide consumption before becoming largely inaccessible due to the conflict.
“The sharp drop in oil prices appears to be pricing in the possibility of a breakthrough in the talks,” said Yang An, analyst at Haitong Futures.
“However, if Trump insists on making no concessions to Iran, an agreement seems unlikely, and the final outcome of the negotiations could reverse sharply,” Yang said.
Iran revealed Wednesday the creation of a new “Persian Gulf Strait Authority,” declaring the establishment of a “controlled maritime zone” within the Strait of Hormuz.
The nation shut down the strait as retaliation for attacks by the U.S. and Israel that initiated the war on February 28. While most combat operations have ceased following an April ceasefire, Iran continues restricting passage through Hormuz as the U.S. maintains a coastal blockade.
Supply disruptions from the critical Middle Eastern region due to the ongoing conflict have compelled nations to rapidly deplete their commercial and strategic reserves, creating alarm about potential exhaustion of these stockpiles.
The U.S. Energy Information Administration reported Wednesday that the nation removed almost 10 million barrels from its Strategic Petroleum Reserve during the previous week, marking the largest withdrawal ever recorded.
The EIA additionally reported that commercial crude stockpiles decreased by 7.9 million barrels to 445 million barrels last week, exceeding analysts’ projections in a Reuters survey that anticipated a 2.9 million-barrel reduction.
Gasoline stockpiles declined by 1.5 million barrels, while distillate inventories increased by 372,000 barrels.
“The drawdown in oil inventories will make it difficult for oil prices to remain low,” said Mingyu Gao, chief researcher for energy and chemicals at China Futures.
“With the Strait of Hormuz blocked, global refined-product and onshore crude inventories are expected to fall below their lowest levels for this time of year in the past five years by late May and late June,” Gao said.
