Crude oil futures fell on Thursday as diplomatic signals between the U.S. and Iran improved, while U.S. government data showed a smaller-than-expected build in commercial crude inventories.
Brent crude futures for November delivery fell 1.9% to $88.60 a barrel by 14:35 ET, while U.S. West Texas Intermediate crude for October delivery declined 1.8% to $83.66 a barrel. Both benchmarks remained down more than 5% for the week, extending losses from Wednesday when reports of easing U.S.-Iran relations pressured prices.
The Energy Information Administration reported a 100,000-barrel increase in U.S. commercial crude inventories for the week ended August 21, to 428.9 million barrels. The build was below market expectations of 597,000 barrels and marked the fourth consecutive week of stock increases, leaving inventories near their highest levels since late May. Overall U.S. oil inventories, including the Strategic Petroleum Reserve, fell by 3.6 million barrels to 718.6 million barrels, the lowest since April 1984.
Diplomatic developments between Washington and Tehran continued to shape market sentiment. The Wall Street Journal reported that the U.S. has shown no interest in reviving a June interim agreement with Iran, with President Donald Trump preferring to maintain economic pressure. The U.S. this week announced new sanctions under its Operation Economic Outcast, targeting entities linked to Iran and warning against continued economic engagement with Tehran.
Iran has tied the reopening of the Strait of Hormuz to U.S. compliance with the June agreement, while both sides have asserted control over the critical waterway. White House Press Secretary Karoline Leavitt stated that the U.S. controls the strait, which remains open, despite shipping data suggesting otherwise. Kpler reported just five vessels transiting the strait on Wednesday, down from seven the previous day, while the U.K. Maritime Trade Operations reported an oil tanker was struck by an unknown projectile while transiting eastbound.
Regional mediation efforts continued, with Russian state media reporting a new framework ceasefire deal between the U.S. and Iran expected in the coming days. Iran and Oman were also reported to be nearing an agreement on a temporary commercial shipping route through the strait, though Tehran warned this may not immediately reopen the waterway. Pakistan indicated progress in its own peace talks with Iran, while Qatar’s prime minister visited Tehran on Thursday.
The White House reiterated that no negotiations with Iran are currently underway, stating that President Trump will maintain pressure until Iran engages meaningfully. Analysts noted that while diplomatic signals may provide short-term relief to oil markets, the absence of a formal agreement and ongoing sanctions risk keeping geopolitical risks elevated.
