Oil prices recovered on Wednesday from the previous session’s two-month lows as investors weighed prospects for a diplomatic resolution to the US-Israeli war on Iran against continued attacks on commercial shipping in the Strait of Hormuz.
Brent crude futures rose 52 cents, or 0.6%, to $92.01 a barrel by 0730 GMT, while US West Texas Intermediate crude gained 16 cents, or 0.2%, to $86.20.
The market has been pulled in opposing directions by expectations of increased oil supplies if tensions ease and concerns that attacks on vessels could continue to disrupt exports from the Middle East.
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Shipping security remains a significant obstacle to a sustained recovery in crude flows through the Strait of Hormuz, one of the world’s most important energy transit routes. Recent data showed little evidence that attacks on vessels had declined in November, following 37 reported attacks in October, the highest monthly total since the start of the Middle East war, according to the Washington Institute for Near East Policy.
“There has been an increase of vessel attacks in the Gulf shipping lanes amidst uncertainty of the diplomacy talks,” said June Goh, senior analyst at Sparta Commodities.
“With the US midterms well over and more crude flows out of the Middle East, there seems to be more bearish tones to the oil price.”
Goh said the central factor for oil markets was whether Iran would accept US demands as part of a diplomatic agreement.
Fresh incidents involving commercial vessels have reinforced concerns about the security of shipping routes in the Gulf.
A tanker was struck northeast of Lima in Oman, the United Kingdom Maritime Trade Operations agency said on Tuesday. Separately, Iran’s Revolutionary Guards Navy said two tankers caught fire after hitting naval mines on what it described as an “unauthorized route” through the Strait of Hormuz.
The incidents have raised questions about how quickly shipping activity could return to normal even if Washington and Tehran reach an agreement.
LSEG Oil Research said in a November 10 note that any increase in flows through the waterway would depend on mine clearance, insurance costs and whether shipowners were willing to resume operations given the security risks.
“Even in the event a deal is struck, an increase in flows through the waterway would still depend on mine clearance, insurance costs and whether or not shipowners would even be willing to take the risk,” the research firm said.
The situation has created a gap between a diplomatic breakthrough and an immediate recovery in physical oil supplies. Tanker operators, insurers and energy traders would still need confidence that vessels could transit safely before shipping volumes fully normalize.
Oil prices fell by more than $3 a barrel at one point during Tuesday’s session after US officials played down the need for further military strikes against Iran. Some of those losses were later recovered after an Iranian security official said no negotiations were taking place between the two countries.
The conflicting signals have left traders uncertain about the prospects for de-escalation and the timing of any meaningful improvement in regional oil shipments.
Developments outside the Middle East are also influencing the oil outlook.
A regional governor said on Wednesday that a drone attack caused a fire in the port area of Ust-Luga, on Russia’s Baltic Sea coast, injuring three workers.
The incident adds to concerns about attacks on Russian energy infrastructure. Industry sources said Russian oil refining capacity had fallen by approximately 30% since late October following renewed Ukrainian drone attacks.
Reduced refining capacity can affect the availability of refined petroleum products and alter the balance between crude exports and domestic processing, adding another layer of uncertainty to global energy markets.
At the same time, Russian and Ukrainian officials met in Abu Dhabi on Tuesday for their first peace talks since February, as envoys of US President Donald Trump renewed efforts to end the war.
The outcome of those discussions could influence the outlook for Russian energy infrastructure and supply disruptions, although no immediate agreement was reported.
US inventory data also offered a bearish signal for crude prices. Market sources, citing figures from the American Petroleum Institute, said US crude stocks increased by 9 million barrels in the week ended November 6.
The reported build suggests additional domestic supply was available in the latest completed week, potentially limiting the effect of geopolitical concerns on prices.
For oil traders, the immediate outlook therefore depends on several competing developments: the possibility of reduced military tensions involving Iran, the continuing security risks in the Strait of Hormuz, attacks on Russian energy infrastructure, and the direction of US crude inventories.
A diplomatic agreement could ease the geopolitical risk premium currently embedded in prices, but the physical recovery of Middle Eastern shipments may take longer if mines, insurance costs and security concerns continue to restrict tanker movements.