Oil prices moved higher on Thursday, extending gains from the previous session as traders assessed diplomatic developments between the United States and Iran and the outlook for energy shipments through the Strait of Hormuz.
At 04:01 ET, Brent crude futures were up 1.1% at $104.19 a barrel, while U.S. West Texas Intermediate crude futures gained 0.9% to $92.99 a barrel.
Brent had settled more than 3% higher on Wednesday, while WTI gained nearly 2%.
The moves followed comments from Iranian President Masoud Pezeshkian at the United Nations General Assembly, where he said Iran would not surrender to U.S. pressure while maintaining that Tehran remained open to diplomacy.
His comments came after U.S. President Donald Trump threatened to “annihilate” Iran if hostilities escalated.
Strait of Hormuz Remains in Focus
A senior Iranian official told Reuters that Tehran was reviewing Washington’s response to an Iranian proposal aimed at ending hostilities, although differences between the two sides remained. Discussions have included the potential reopening of the Strait of Hormuz and the lifting of the U.S. blockade on Iranian ports.
The Strait of Hormuz has remained a focus for energy markets because of its role as a transit route for oil and liquefied natural gas shipments. Vessel traffic through the waterway has declined substantially during the conflict.
Expectations of increased Gulf supply had previously been supported by the restart of Saudi Arabia’s East-West Pipeline, which allows crude to be transported to the Red Sea while bypassing the Strait of Hormuz. Operations resumed at a reduced rate following disruption earlier in September.
Markets continued to assess how diplomatic negotiations and regional shipping conditions could affect the availability of oil supplies.
Higher Oil Prices Add to Interest Rate Debate
The increase in oil prices has coincided with stronger U.S. business activity data, contributing to a reassessment of the outlook for inflation and Federal Reserve monetary policy.
The Federal Reserve increased interest rates by a quarter of a percentage point at its previous meeting.
“Higher oil prices play a role in the hawkish repricing of the Fed’s policy path, and last week’s rate hike, at a time when concerns over sticky inflation still linger,” analysts at BCA Research said.
The comments represent BCA Research’s assessment of the relationship between energy prices and market expectations for monetary policy. Future Federal Reserve decisions will depend on subsequent economic data and policymakers’ assessments.
U.S. Crude Inventories Rise by 3 Million Barrels
U.S. commercial crude inventories increased by approximately 3 million barrels to 426.4 million barrels in the week ended September 18, according to the Energy Information Administration.
The increase compared with expectations cited in the supplied material for a decline of 640,000 barrels.
Gasoline inventories fell by 1.7 million barrels, while distillate stocks, which include diesel and heating oil, declined by 400,000 barrels.
Separately, the supplied material said the White House was considering a 90-day restriction on diesel exports. U.S. ultra-low-sulphur diesel futures moved lower on Wednesday following the report.