Oil prices declined on Thursday as investors weighed continuing attacks on commercial vessels near the Strait of Hormuz against reports that the United States could ease sanctions on certain oil tankers to reduce global shipping costs.
Brent crude futures fell 1.9% to $104.02 per barrel at 03:35 ET (07:35 GMT), while West Texas Intermediate (WTI) futures declined 1.1% to $94.04 per barrel.
The losses came despite persistent concerns about energy supply disruptions in the Middle East, where attacks on commercial shipping and regional fighting have threatened important oil transportation routes.
Reports of a possible change in US sanctions policy, alongside recovering production and exports from some major oil-producing regions, contributed to downward pressure on prices.
Attacks Near Strait of Hormuz Raise Supply Concerns
Two commercial vessels sank near the Strait of Hormuz during the preceding 24 hours after being struck by separate projectiles, according to maritime officials cited by Reuters.
The vessels were described as a container ship and a dry bulk carrier.
The incidents followed an increase in attacks on commercial shipping near the strait, raising concerns about further disruption to crude oil and petroleum product exports from the Persian Gulf.
The Strait of Hormuz is a major international energy transportation route, and restrictions on vessel movements can affect oil supply schedules, insurance costs and freight rates.
Security concerns have also extended to the Red Sea region.
Fighting between Saudi Arabia and Houthi militants in Yemen has increased fears that the Middle East conflict could affect shipping through the Bab el-Mandeb Strait, which connects the Red Sea with the Gulf of Aden.
Further disruption to either maritime route could increase transportation costs and complicate the delivery of crude oil and refined products to international markets.
US Reportedly Considers Relaxing Shadow Fleet Sanctions
US President Donald Trump is reportedly considering easing restrictions on vessels associated with the so-called shadow fleet, which transports oil and petroleum products from countries subject to sanctions.
The vessels are commonly associated with shipments originating in Russia, Iran and Venezuela.
According to the reports, a relaxation of sanctions could help reduce elevated freight costs and ease pressure on international oil prices.
Restrictions on tanker operations can limit available shipping capacity and increase transportation expenses, particularly when vessels are already being diverted because of security concerns.
Allowing more ships to participate in international oil transportation could potentially improve shipping availability and reduce some of these costs.
However, it remains unclear whether the US administration will proceed with the reported measures or what form any changes might take.
The possibility of an easing of restrictions nevertheless provided an additional factor for traders assessing the outlook for global oil supplies.
Russian Production Rises as Middle East Exports Recover
Recent increases in production and exports from major oil-producing regions have also helped limit upward pressure on crude prices.
According to the International Energy Agency (IEA), Russian crude oil production increased by 65,000 barrels per day in September to 8.43 million barrels per day.
However, output remained 870,000 barrels per day below the level recorded a year earlier.
The agency also reported that Middle East crude oil exports increased by 4.4 million barrels per day in September.
That recovery brought regional exports to approximately 75% of their levels before the outbreak of the Iran war in late February.
The figures suggest that some oil supply flows have recovered despite continuing geopolitical disruption.
However, the IEA warned that global diesel markets could remain constrained well into 2027 because of ongoing crude supply interruptions and refinery outages.
The agency also forecast a decline of 2.6 million barrels per day in global oil demand during 2026.
These supply and demand developments remain important considerations for traders evaluating the potential impact of further disruptions in the Middle East.
US Crude Inventories Fall Sharply Following Hurricane Disruption
Separate data from the American Petroleum Institute (API) indicated a much larger-than-expected decline in US crude oil inventories.
According to the API, commercial crude inventories fell by 11.12 million barrels during the week ended 9 October.
Analysts had expected inventories to increase by approximately 1.9 million barrels.
The unexpected drawdown followed disruptions to oil production along the US Gulf Coast caused by Hurricane Isaias, which made landfall late the previous week.
The storm was estimated to have temporarily shut down nearly two-thirds of Gulf oil production, reducing domestic crude supply.
The sharp inventory decline suggested tighter near-term supply conditions in the United States, although the API figures are preliminary.
Investors were awaiting official weekly inventory data from the US Energy Information Administration, scheduled for release later on Thursday, to assess whether the government figures would confirm the reported drawdown.
Despite the substantial decline in US inventories and continuing maritime security risks, crude prices moved lower as markets assessed the possibility of reduced shipping restrictions and improving supply conditions.