TLDR
- Brent crude declined more than 2% to $99.11 per barrel; WTI tumbled to $93.08 during Thursday’s session
- The benchmarks previously plunged over 7% Wednesday following diplomatic breakthrough reports
- Sources indicate Washington and Tehran are nearing agreement on a single-page memorandum to conclude hostilities
- A critical element includes phased reopening of the Strait of Hormuz, a passage for approximately 20% of worldwide oil shipments
- American crude stockpiles decreased by 2.3 million barrels, falling short of the anticipated 3.4 million barrel reduction
Crude markets continued their downward trajectory Thursday, building on the previous session’s substantial selloff, as diplomatic momentum between Washington and Tehran intensified speculation about reopening a critical global energy corridor.
Brent crude tumbled $2.16, representing approximately 2.1%, settling at $99.11 per barrel. West Texas Intermediate for US delivery declined $2 to reach $93.08. The benchmarks had previously plummeted more than 7% during Wednesday’s trading, reaching their lowest levels in two weeks.
The primary catalyst behind the selloff was a series of diplomatic reports indicating the United States and Iran are approaching consensus on a single-page memorandum of understanding that would officially terminate current hostilities.
Axios published reports suggesting the White House anticipated Iran’s formal response within a 48-hour window. CNN indicated Tehran was expected to deliver its reply to Washington’s proposal by Thursday. Iran’s foreign ministry spokesperson verified that the nation would transmit its response through diplomatic mediators.
Saudi Arabia’s Al Arabiya network additionally reported both nations had achieved preliminary understandings to reduce the American blockade affecting Iranian ports, contingent on phased reopening of the Strait of Hormuz. Reuters noted it could not immediately confirm these specific details.
The Strait of Hormuz represents one of the planet’s most strategically vital petroleum shipping corridors. Approximately one-fifth of worldwide crude trade transits through this narrow passage. Any interruption or resumption of commercial traffic through the strait immediately impacts global energy supplies and pricing.
Earlier in the week, Washington suspended military operations aimed at restoring commercial navigation through the strait following forceful Iranian responses.
Diplomatic Developments Fuel Market Volatility
Trading activity has demonstrated extreme sensitivity to each development emerging from ongoing negotiations. Priyanka Sachdeva, senior market analyst at Phillip Nova, noted crude markets have been “caught between diplomacy and disruption for over two months.”
She indicated a formalized agreement could trigger oil prices to decline substantially as geopolitical risk premiums evaporate from market calculations.
Analysts at ING suggested an agreement restoring Hormuz commercial traffic would diminish supply-risk premiums, though any postponement could rapidly elevate prices once again.
Treasury Secretary Scott Bessent urged Beijing this week to pressure Tehran into reopening the strait. He confirmed President Trump and Chinese President Xi Jinping will address this matter during their scheduled meeting next week.
Hiroyuki Kikukawa from Nissan Securities Investment suggested peace negotiations will probably persist at minimum until the US-China summit concludes, though subsequent developments remain uncertain.
American Inventory Figures Constrain Price Recovery
Weekly American petroleum inventory statistics from the Energy Information Administration provided modest price support. Crude reserves decreased by 2.3 million barrels during the week concluding May 1, reaching 457.2 million barrels.
Market analysts had projected a more substantial drawdown of 3.4 million barrels, meaning the smaller-than-forecast decline limited any potential price rebounds.
Gasoline reserves dropped by 2.5 million barrels. Distillate inventories, encompassing diesel and heating oil, declined by 1.3 million barrels.
The EIA data additionally revealed robust American petroleum exports, indicating sustained demand for US supplies while Middle Eastern energy flows remain compromised.
Iran confirmed Wednesday it was evaluating the American proposal, which sources described as formally terminating the conflict while leaving certain critical US demands unaddressed, including suspension of Iran’s nuclear program.
