Oil prices rose around 2% on Thursday as diplomatic efforts between the US and Iran showed little sign of progress, keeping geopolitical risks in focus.
Brent crude futures climbed back above $105 a barrel, while investors also assessed uncertainty surrounding a potential US ban on diesel exports.
Brent crude futures were up 2.09%, at $105.2 a barrel, after rising as high as $106.50 earlier in the session. West Texas Intermediate futures gained 2.05%, to $94.13 a barrel.
The market remains supported by uncertainty over the conflict and the potential impact on energy supplies, although continued oil flows through the Strait of Hormuz and the restart of Saudi Arabia’s East-West pipeline have helped contain some physical supply pressures.
US-Iran talks remain stalled
The US and Iran remain divided over how to end their conflict.
A senior Iranian official told Reuters that Tehran was reviewing Washington’s response to its peace proposals, which include lifting the US naval blockade of Iranian ports and reopening the Strait of Hormuz.
Earlier reports indicated that Iran had given the US one week to meet its publicly stated demands, including lifting the naval blockade.
Iranian President Masoud Pezeshkian said at the United Nations General Assembly that Tehran would not surrender to US pressure.
An adviser to Iran’s Supreme Leader, Mojtaba Khamenei, also warned that Tehran could expand the Middle East conflict into the Indian Ocean if the US or Israel launches another attack, according to an AFP report citing Iran’s Fars news agency.
Peter Cardillo of Spartan Capital said in a WSJ report that crude oil remained in strong demand because there was still no evidence of a diplomatic breakthrough that would bring the parties back to negotiations.
MUFG analyst Soojin Kim said continued flows through Hormuz and the Saudi pipeline restart could ease physical supply pressures, but persistent tanker attacks and limited diplomatic progress could keep volatility and the geopolitical risk premium elevated.
Diesel export uncertainty adds to market concerns
European diesel futures moved lower from their all-time highs on Thursday as markets assessed reports of a possible US ban on diesel exports.
A White House official denied a report that the US was preparing a 90-day diesel export ban.
The European Commission said it was concerned about the reported plans, warning that such a measure could have a negative impact on both sides.
Analysts and market watchers have said a US diesel export ban would do little to reduce high energy prices and could instead worsen global supplies and further disrupt economies.
The physical oil market also remains unsettled. Priyanka Sachdeva, head of market insights at Phillip Nova, said in a Reuters report that the physical market was nowhere near fully normalised.
Sachdeva added that Brent carries a larger geopolitical and sea-route premium because international crude is more exposed to Middle East and Hormuz disruptions, while WTI benefits more from relatively insulated US supply.
US inventories show mixed signals
US distillate stockpiles, including diesel and heating oil, fell by 428,000 barrels to 107.4 million barrels last week, according to Energy Information Administration data.
US crude inventories, meanwhile, increased by 3 million barrels to 426.4 million barrels.
Analysts polled by Reuters had expected a 641,000-barrel decline.
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