Oil prices extended their rally on Thursday as the absence of a clear breakthrough in negotiations between the United States and Iran kept concerns over Middle East energy supplies firmly embedded in the market.
Brent crude oil, the international benchmark for Nigerian crude oil, rose more than 2 percent during Thursday’s trading, extending a sharp advance recorded in the previous session as traders reassessed expectations that diplomacy could quickly reduce geopolitical risks surrounding global oil flows.
The international benchmark had settled at $103.08 per barrel on Wednesday, gaining $3.83 or 3.86 percent.
U.S. West Texas Intermediate crude settled the previous session at $92.16 per barrel after adding $1.64, or 1.81 percent.
Thursday’s advance pushed Brent further above the psychologically important $100-per-barrel level and reversed part of the weakness seen earlier in the week when hopes of improved oil flows and renewed diplomatic engagement weighed on prices.
The market’s attention has shifted back towards the risk of prolonged disruption after discussions involving Washington and Tehran failed to produce a decisive step towards ending the conflict.
Iranian President Masoud Pezeshkian told the United Nations General Assembly that Tehran would not surrender to U.S. pressure, although Iranian officials have continued to leave open the possibility of reaching an agreement through negotiations.
The United States and Iran remain divided over several key issues despite communication between the two sides.
For energy markets, the duration of the conflict remains critical because instability continues to threaten production infrastructure and shipping routes responsible for moving a significant portion of the world’s crude and refined petroleum products.
The Strait of Hormuz remains at the centre of those concerns.
The waterway is one of the world’s most important energy corridors, connecting major Gulf producers with customers across Asia, Europe and other markets.
Restrictions and security risks surrounding the strait have forced producers, traders and shipping companies to seek alternative routes while increasing transportation and insurance costs.
Saudi Arabia has restarted its East-West pipeline after a drone attack disrupted operations earlier this month, providing an alternative route for crude exports through the Red Sea.
However, the pipeline is operating below its full capability and repairs to damaged infrastructure are expected to take several weeks.
The continued uncertainty means the restoration of Saudi export capacity has not been sufficient to eliminate the geopolitical premium embedded in crude prices.
Traders are also watching developments in the refined-products market.
The United States is considering measures that could restrict diesel exports as domestic fuel prices remain elevated, creating additional uncertainty for global product supplies.
Diesel markets have already tightened substantially following disruptions affecting refining and exports from several major producing regions.
The possibility of additional restrictions from the United States has added another layer of concern for a market already struggling with constrained supplies.
The geopolitical pressure has so far outweighed bearish signals from U.S. petroleum inventories.
Latest data showed U.S. crude inventories increased by approximately 3 million barrels last week, a development that would ordinarily put downward pressure on oil prices by indicating stronger available supply.
Gasoline inventories also increased, while distillate stocks declined.
Despite the crude inventory build, traders continued to place greater weight on the possibility of prolonged supply disruptions in the Middle East.
The price action illustrates how geopolitical developments have overtaken conventional inventory fundamentals as the dominant short-term driver of the oil market.
Brent has remained above $100 despite efforts to restore alternative Saudi export infrastructure and indications from both Washington and Tehran that diplomatic channels remain open.
The continuation of hostilities could keep a substantial risk premium in crude prices, particularly if shipping through the Strait of Hormuz remains restricted or attacks on regional energy infrastructure intensify.
Conversely, a credible agreement that improves the security of oil shipments could quickly remove part of that premium and put renewed downward pressure on prices.
For now, the absence of meaningful progress between Washington and Tehran has strengthened the market’s focus on supply risk.
With Brent extending its advance after Wednesday’s nearly 4 percent surge, oil traders are signalling that the possibility of prolonged Middle East disruption remains more influential than rising U.S. crude inventories.
