Oil prices moved lower on Thursday, ending a three-day advance, as traders weighed developments in the Middle East against fresh evidence of tightening crude supplies in the United States.
Brent crude, the international benchmark, fell 1.5% to $96.30 per barrel, while U.S. West Texas Intermediate (WTI) crude declined 1.2% to $94.84 per barrel.
The retreat followed a strong rally in the previous session, when both benchmarks gained nearly 2% and climbed to their highest levels in more than a week.
Ceasefire Agreement Offers Relief but Uncertainty Persists
Energy markets remained heavily influenced by geopolitical developments surrounding the conflict involving the United States and Iran, which has added a significant risk premium to crude prices.
Recent tensions included reports of Iranian missile strikes targeting Kuwait and Bahrain, as well as U.S. military operations against Iran’s Qeshm Island near the Strait of Hormuz. Meanwhile, Israeli forces have continued military activity in southern Lebanon against Hezbollah-controlled positions.
Late Wednesday, Israel and Lebanon agreed to move forward with a fragile ceasefire arrangement. The deal is dependent on the cessation of attacks by the Iran-backed Hezbollah group, which was notably absent from the U.S.-mediated negotiations.
Efforts to secure a broader diplomatic breakthrough between Washington and Tehran have so far produced limited progress, increasing concerns that the conflict could continue and place further pressure on regional energy supplies.
The Strait of Hormuz remains a key focal point for markets. The strategic waterway, which normally handles roughly 20% of global oil shipments, has effectively been closed to normal traffic since the conflict escalated in late February.
Some market fears eased after U.S. President Donald Trump stated during a podcast interview that Iran had agreed not to pursue nuclear weapons, boosting hopes that diplomatic discussions could eventually lead to a resolution.
According to a Wall Street Journal report, Trump has also told advisers that military action against Iran would not resume unless American personnel are killed.
At home, political pressure on the administration appears to be growing. The U.S. House of Representatives approved a resolution aimed at preventing further military involvement, although the measure still requires Senate approval and sufficient support to overcome any presidential veto.
“Every day that passes without a resumption of oil flows leaves the market increasingly vulnerable. This increases the pressure to strike a deal,” ING analysts said in a note.
Sharp U.S. Inventory Decline Supports Market
While geopolitical concerns eased slightly, stronger-than-expected inventory data helped limit losses in oil prices.
Figures released by the U.S. Energy Information Administration showed crude stockpiles fell by 8 million barrels during the week ended May 29, significantly exceeding market expectations for a decline of approximately 3 million barrels.
“While inventories do fall seasonally as refiners ramp up operating rates, the pace of decline has been faster than usual,” the ING analysts said.
U.S. crude exports rose to 5.9 million barrels per day, among the highest levels ever recorded, as buyers in Europe and Asia sought alternative supplies amid disruptions linked to Middle East tensions.
Broader supply concerns continue to provide support for oil prices. According to EIA estimates, global petroleum inventories are being depleted at a rapid pace and could approach critically low levels ahead of the peak summer demand period if current trends persist.
Market Focus Remains on Supply Risks
Although the ceasefire agreement reduced some immediate geopolitical fears, traders remain cautious about the outlook for global energy supplies.
With inventories falling, export flows disrupted and uncertainty surrounding negotiations between the U.S. and Iran continuing, market participants are closely monitoring developments that could influence both physical supply and future price direction.