Oil Extends Decline on Diplomacy Hopes

Crude oil rose to as high as $87.75 a barrel on Thursday before paring gains toward $86 a barrel, the lowest since August 31, as signs of recovering Saudi Arabian supply outweighed escalating tensions between Washington and Tehran. Saudi Arabia reported a 26% increase in oil production in October, bringing output to one of its highest monthly levels in years, while Iraq also raised production to a wartime record. Exports remained resilient despite disruptions to the Strait of Hormuz, supported by alternative routes such as Saudi Arabia’s East-West pipeline to the Red Sea and ship-to-ship transfers. Meanwhile, President Donald Trump said the US no longer needs a deal with Iran, signalling a shift away from recent diplomatic efforts. Tehran also maintained a hardline position, with senior official Mohsen Rezaee ruling out the removal of any enriched nuclear material from the country.

Crude oil rose toward $87 per barrel on Thursday, recouping some losses from earlier in the week as the US and Iran remain deadlocked in negotiations while avoiding further escalation. A senior Iranian security official stated that the country would not surrender “a single atom” of its enriched nuclear material, rejecting one of Washington’s key conditions for peace talks. Tehran has also reiterated that the US must lift its sanctions and end the naval blockade before the Strait of Hormuz can be reopened. Elsewhere, Ukrainian drone attacks have disrupted refineries accounting for approximately 30% of Russia’s total oil-processing capacity since late October. Despite these developments, the US oil benchmark remains nearly 20% below its October peak, as crude supply flows from the Middle East continue to recover. Saudi Arabia told OPEC that crude output surged by 26% in October, marking one of its strongest monthly production levels in recent years.

Crude oil trimmed gains to settle near $86.5 on Wednesday after touching $88 earlier, recovering from a 10-week low amid persistent Middle East tensions. US Treasury Secretary Scott Bessent reportedly moved from his Washington home to a military base for safety amid growing Iranian threats. Reports say US officials have recently seen Iran’s plots against American targets reach a more advanced stage and that Bessent’s leading role in the US-Iran war has made him a top target. Iranian officials denied negotiations are underway. Security chief Mohsen Rezaei said claims that talks were continuing were aimed at “easing economic pressures and reducing oil prices.” Separately, Secretary of State Marco Rubio reportedly said military action against Iran may not be necessary if economic sanctions and Washington’s naval blockade are working. Meanwhile, Ukrainian drone strikes have disrupted refineries representing roughly 30% of Russia’s total oil-processing capacity since late October.