Oil prices declined by more than 1% on Thursday, although they remained near recent multi-month highs after the United States and Iran agreed to hold diplomatic discussions in Oman on Friday, easing short-term concerns about supply disruptions.
Brent crude futures fell by 86 cents, or 1.2%, to $68.6 per barrel at 1036 GMT. Meanwhile, U.S. West Texas Intermediate crude dropped 82 cents, or roughly 1.3%, to $64.32 per barrel.
Despite the decline, Brent prices continued to trade just $3 below the five-month peak reached at the end of January, when markets were driven higher by concerns over potential supply interruptions.
UBS analyst Giovanni Staunovo noted that oil markets remain heavily influenced by geopolitical developments in the Middle East, with investors closely monitoring the upcoming negotiations in Oman.
The planned talks come as the United States increases its military presence in the region, while several regional stakeholders are attempting to prevent tensions from escalating into a broader conflict.
Roughly 20% of global oil consumption moves through the Strait of Hormuz, which lies between Oman and Iran. Several major OPEC producers — including Saudi Arabia, the United Arab Emirates, Kuwait and Iraq — rely on the strait to export most of their crude, alongside Iran.
John Evans, analyst at PVM Oil Associates, said market sentiment ahead of Friday’s meeting would likely remain cautious, supported by hopes for diplomatic progress.
“However, there will be no comfort as such in prices, for one untoward remark or a breakdown in talks and the Brent price will soon be banging on the door of $70 a barrel and looking at year-to-date highs,” he said.
Heightened volatility has prompted traders to secure price exposure this year, with January seeing record trading volumes for WTI Midland contracts in Houston, driven by concerns over Middle East supply risks and the growing flow of Venezuelan crude toward the U.S. Gulf Coast.
Analysts also pointed out that a stronger U.S. dollar and continued volatility in precious metals markets added pressure to commodity prices and broader risk sentiment during Thursday’s session.