Oil prices fell on Thursday, extending a streak of multiple days of losses, on expectations that talks between Iran and Qatar may open the key Strait of Hormuz and reduce supply disruptions from the Middle East war. Brent crude futures were down 60 cents, or 0.7%, to $87.24 a barrel by 0004 GMT, down for a fourth day. West Texas Intermediate crude futures fell 56 cents, or 0.7%, to $81.67, down for a fifth day.
Iran and Oman are working on finalising details of an agreement to control the Strait of Hormuz, a senior Iranian source said on Wednesday, after Iran's Revolutionary Guards said the two countries had agreed on how to share the waterway that connects major Gulf oil producers to markets and its revenues. The strait carried oil and natural gas shipments equal to about one-fifth of global consumption of the fuels before the US-Israeli war on Iran started on February 28. Since Iran worked to shut the waterway in response, oil flows have dropped to about one-quarter of their pre-war level, according to ship-tracking data.
"Crude oil edged lower as the prospect of the Strait of Hormuz reopening improved amid ongoing talks," said Daniel Hynes, senior commodity strategist at ANZ, in a note on Thursday, though he cautioned "concerns over shortages in the oil market persist." Qatar's prime minister will head to Iran on Thursday to relaunch diplomatic talks to end the conflict, which is nearly six months old. The US has halted its attacks on Iran for about a month and is seeking to impose greater economic pressure on Iran, which has raised investors' expectations for an easing of the Gulf supply disruptions.
Iranian officials have also said the strait would not open unless the US met under an interim ceasefire agreement that was struck in June and later unravelled. ANZ's Hynes also pointed to the impact the Middle East war and the Russia-Ukraine war are having on the diesel market. Middle East refineries have been damaged in that conflict, and Ukraine has hit several Russian refineries, cutting exports from what was a major global diesel supplier. The US Energy Information Administration reported on Wednesday that distillate stockpiles dropped by 2.2 million barrels in the week to August 21 to 103.4 million barrels, the lowest level ever recorded for this time of year.