Oil prices fell as concerns about supply disruptions in the Middle East eased, and the International Energy Agency raised its estimates of the war's impact on supply.
Brent crude fell towards $104 a barrel, after rising 1.3% during the first three sessions of the week, while West Texas Intermediate crude traded near $94.
The Saudi-led coalition supporting the legitimate government in Yemen announced on Thursday that it had intercepted and destroyed a drone in the kingdom's eastern region. Despite continued missile and drone attacks by the Iranian-backed Houthi rebels on Saudi Arabia, oil supplies have not been significantly affected.
Saudi oil exports through the Bab al-Mandab Strait have returned to about 1.5 million barrels per day in recent days, after at least six loaded tankers passed through from the port of Yanbu, according to shipping tracking data up to October 12.
On the other hand, the International Energy Agency lowered its forecast for global oil consumption by 2.6 million barrels per day this year, an increase of 100,000 barrels per day from the forecast issued a month ago.
Takahiro Asaoka, senior economist at the Itochu Research Institute, told Bloomberg: “The Houthi attacks did not cause the severe supply disruptions the market had feared, which led to a partial reduction in the geopolitical risk premium.” He added that the International Energy Agency’s weaker demand forecast also put downward pressure on prices.
Oil stockpiles are low and shipping disruptions continue.
The oil market remains tight after months of turmoil caused by the war between the United States and Iran, which has pushed Brent crude up by more than 70% this year.
Oil consumers resorted to drawing on inventories, while onshore stockpiles fell to levels near their lowest in at least a decade, according to the International Energy Agency. Shipping disruptions also drove up ocean freight costs, adding further pressure to the physical oil market.
In the Middle East, increasing numbers of oil tankers are avoiding the areas they usually head to for crude loading, indicating that escalating Iranian attacks on shipping are complicating export logistics.
Ships capable of carrying at least 37 million barrels stopped or changed course while heading towards loading areas off the UAE and Oman, although there is no clear evidence of a decline in oil flows from the Gulf.
The United States is considering easing sanctions on shadow fleet vessels that have transported oil and petroleum products from countries including Russia, Iran, and Venezuela, in an effort to lower global shipping costs, Reuters reported, citing a U.S. official. This move could allow the use of some of these vessels, but it is unclear whether companies would be willing to utilize them.
Risks of continued conflict between Iran and the United States
The prospects for de-escalating tensions through diplomacy remain uncertain. Iranian Parliament Speaker Mohammad Bagher Ghalibaf stated that Iran's objectives are not endless war or protracted negotiations, but rather to wear down the enemy until it is forced to accept Iran's demands.
The uncertainty suggests a prolonged frozen conflict, punctuated by positive developments followed by renewed attacks that force markets to reassess the situation, according to Rob Barnett, senior energy analyst at Bloomberg Intelligence. He said a return to active conflict could push prices to much higher levels.
Meanwhile, oil production in the UAE rose to record levels last month, according to the energy agency.
In a separate development, Russia accused Ukraine of attacking two oil refineries on Wednesday, in violation of the energy ceasefire brokered by US President Donald Trump. Kyiv denied the claim.
In the United States, the American Petroleum Institute, funded by the oil industry, reported that nationwide crude oil inventories fell by 11.1 million barrels last week, according to a document seen by Bloomberg. If confirmed by official data due on Thursday, it would be the largest decline since June 2025.
Latest price movements
Brent crude futures for December delivery fell 1.6% to $104.39 a barrel at 10:21 a.m. Singapore time.
West Texas Intermediate crude for November delivery fell 1.3% to $93.83 a barrel.
