Oil prices edged lower on Thursday as renewed attacks on shipping in the Strait of Hormuz and uncertainty over negotiations involving Iran and Ukraine offset expectations of increased crude supply.
Brent crude futures fell 37 cents, or 0.4%, to $92.39 a barrel at 0946 GMT, while US West Texas Intermediate crude declined by the same amount to $86.16. Both benchmarks had lost more than $1 a barrel during early Asian trading and were heading for weekly declines.
Prices later traded close to unchanged, with WTI up less than 0.1% at $86.59 and Brent gaining 0.17% to $92.92, as investors weighed persistent geopolitical risks against expectations of additional supply.
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“Market players are vacillating between tentative truces in Ukraine and the Middle East and the ongoing atrocities against energy infrastructure and ships,” said Tamas Varga, an analyst at PVM Associates.
The latest escalation came after two oil supertankers were disabled by massive explosions after hitting naval mines in the Strait of Hormuz on Wednesday night, according to Iran’s Revolutionary Guards Navy. The force said the vessels had ignored warnings against using an unauthorized route through the waterway.
The strait is one of the world’s most important oil shipping corridors. Shipping disruptions there have heightened concerns about the reliability of crude supplies, while fires aboard other tankers, oil spills reaching coastlines and attacks on regional infrastructure have added to the risks facing energy markets.
However, supply developments have also limited upward pressure on prices. OPEC+ crude production increased in October, supported by higher Saudi Arabian output despite shipping disruptions through the strait. The rise in production has added to the market’s supply considerations at a time when geopolitical uncertainty continues to complicate the outlook.
Diplomatic efforts to end the conflict involving Iran remain uncertain. Iranian security chief Mohsen Rezaei said in televised remarks that Tehran would not allow any enriched nuclear material to leave the country and warned that there would be consequences if the United States launched further military strikes.
Washington has maintained that nuclear issues must be included in any initial negotiations with Iran aimed at ending the eight-month-old war. US officials have also played down the need for additional military action, leaving uncertainty over whether diplomatic efforts can produce an agreement.
The gap between the two positions matters for oil markets because a failure to reach an understanding could prolong disruption around the Strait of Hormuz and sustain a geopolitical risk premium in crude prices.
Developments in Ukraine offered a more positive diplomatic signal. Russian and Ukrainian negotiators agreed to a major prisoner exchange following two days of peace talks in Abu Dhabi that ended on Wednesday. US mediators said, however, that substantial differences remained on other issues, including territorial questions.
Ukrainian President Volodymyr Zelenskiy said Kyiv hoped to achieve concrete results towards resolving the war this year. The prisoner agreement provides evidence of progress in negotiations, but unresolved territorial disputes mean a broader settlement remains uncertain.
Investors were also awaiting official US crude and petroleum product inventory figures from the Energy Information Administration, scheduled for Thursday after being delayed by a national holiday. The data could provide further indications of domestic supply conditions and demand.
Treasury Yields Climb As Investors Await US Inflation Data
In the bond market, US Treasury yields moved higher on Thursday as trading resumed after the Veterans Day holiday, with investors preparing for fresh inflation and housing data that could influence expectations for Federal Reserve policy.
The 10-year Treasury yield, a benchmark for mortgage rates, auto loans and other borrowing costs, rose 2 basis points to 5.0100%.
The two-year yield, which is more sensitive to expectations for short-term Federal Reserve interest rates, increased 5 basis points to 4.7800%. The 30-year yield remained broadly unchanged at 5.3503%.
A basis point is 0.01 percentage point. Bond prices and yields move in opposite directions, meaning rising yields indicate falling bond prices.
Investors are looking to Friday’s producer price index report for October, which measures changes in prices received by businesses and provides an indication of wholesale inflation. The index is expected to rise 0.4%, compared with a 1.3% increase in September.
Before then, the National Association of Realtors is due to release October existing home sales figures on Thursday. Sales increased 1.5% in September to an annualized rate of 3.99 million homes, recovering from a two-year low in the previous month. Trading Economics estimates point to an increase to 4 million in October.
The data will help investors assess whether inflationary pressures are easing and how much room the Federal Reserve has to adjust interest rates. The increase in Treasury yields suggests that bond traders remain cautious as they await clearer signals about the direction of the US economy and monetary policy.
Oil markets’ immediate balance remains between supply growth and geopolitical disruption. Higher OPEC+ output is limiting some of the pressure on prices, but attacks on shipping and the unresolved negotiations involving Iran leave the risk of further supply interruptions in place.