Crude oil prices fluctuate amid Middle East tension and hopes of peace

Amid escalating geopolitical tension in the Middle East region and hopes of establishing peace, heavy volatility is seen in crude oil prices. According to a Business Standard report, a decline in oil prices was recorded on Thursday, reversing the increase that happened the previous day. Brent crude futures fell 1.22 dollar or 1.1 percent to 114.10 dollar per barrel, while US West Texas Intermediate (WTI) crude futures fell 1.33 dollar or 1.3 percent to reach 101.45 dollar. On Wednesday, an increase of 1.3 percent in Brent crude and 3 percent in WTI was seen.

The main reason for this decline in oil prices is the possibility of peace talks amid fears of supply disruptions in the Middle East. According to a Wall Street Journal report, US Vice President JD Vance sent a letter to Iranian Security Council head Mohsen Rezaei, attempting to restart peace talks. Nomura Securities economist Yuki Takashima stated, "Selling pressure is being seen amid expectations that peace talks could restart. However, the decline has remained limited."

Reasons for the limited decline in prices include increasing attacks by Yemen's Houthis and fear of the possibility of an attack on Iran by the America after the mid-term elections on November 3. According to a The Times of India report, following Houthi missile attacks, Brent crude prices reached up to 115 dollar per barrel, which increased fears of disruption in oil supplies. According to a Saudi report, the Saudi coalition destroyed a ballistic missile launched by Yemen's Houthis towards their eastern region. Earlier, Houthis claimed to have attacked Saudi Arabia's largest oil refinery with a missile, which are attacks on the world's second largest crude producer country. However, Saudi authorities did not immediately confirm the attack on this facility having a capacity of 5,50,000 barrels per day. According to the Yemeni government army, Houthis also attacked Aden airport on Wednesday.

On the other hand, Qatari mediators have presented a draft of a new agreement to Iran to end the war with America and Israel, but a senior Iranian official rejected it calling it an unacceptable idea. Iran's Foreign Minister stated that Tehran is giving diplomatic efforts a chance to succeed. The oil market has also been impacted by expectations of an increase in Russia's crude and diesel production. According to a report by JPMorgan analysts, after the attack on the Ryazan refinery on October 15, there have been no confirmed attacks on Russian refining infrastructure, due to which Russian refinery production increased by 350 kbd to 4 mbd last week. This increase may raise Russia's crude production, but it is not necessary that it will increase crude exports.

America's Energy Information Administration (EIA) stated that during the week ending on October 23, energy companies withdrew 1.9 million barrels of crude from storage, while analysts were expecting an increase of 15,000 barrels. However, gasoline stock increased by 3.9 million barrels, which was more than analysts' expectation of a 0.9 million barrel decrease.