Oil falls with US-Iran peace talks in focus
LONDON - Oil prices fell on Thursday, extending losses from the previous session as investors monitored peace talks between the United States and Iran, while economic activity in the euro zone shrank sharply.
Brent crude futures dropped 82 cents, or 0.8%, to $104.20 a barrel by 0949 GMT, and U.S. West Texas Intermediate futures were down 60 cents, or 0.6%, at $97.66.
Both benchmarks dropped around 5.6% on Wednesday to their lowest in more than a week after U.S. President Donald Trump said talks with Iran were in the final stages.
Tehran "is responding to a text sent by the U.S.", Iran's ISNA news agency reported on Thursday, adding that the visit of Pakistan's army chief to Tehran was in order to minimise the gaps and help reach an official announcement of understanding.
Trump has suggested he could wait a few days for "the right answers" from Iran but was also willing to resume attacks on the country.
"We've been in this situation multiple times before, which ultimately led to disappointment," ING analysts said in a note on Thursday, forecasting an average Brent price of $104 a barrel in the current quarter.
Iran warned against further attacks and unveiled steps entrenching its control of the crucial Strait of Hormuz, which remains mostly closed. Before the war the strait had carried oil and liquefied natural gas shipments equal to about 20% of global consumption.
"Oil prices have remained relatively contained despite the scale of the Middle East disruption," said Kim Fustier, senior global oil and gas analyst at HSBC. A pullback in Chinese buying, as well as a surge in Atlantic Basin exports led by the U.S. and rapid draw on inventories and strategic stockpiles "has eased immediate availability concerns and narrowed some of the extreme physical dislocations seen earlier in the crisis," she said.
Economic activity in the euro zone shrank at its sharpest rate in more than two-and-a-half years in May as a war-driven surge in living costs hammered demand for services across Europe and firms accelerated layoffs, surveys showed on Thursday.
DRAWDOWNS IN STOCKPILES
On Wednesday, Iran announced a new "Persian Gulf Strait Authority", saying there would be a "controlled maritime zone" in the Strait of Hormuz.
Iran effectively closed the strait in response to the U.S. and Israeli attacks that started the war on February 28. Most of the fighting has stopped since an April ceasefire, but while Iran is limiting traffic through Hormuz, the U.S. has blockaded its coastline.
Supply losses from the key Middle Eastern producing region because of the war have forced countries to tap their commercial and strategic inventories at a rapid rate, raising concerns about draining them.
The U.S. Energy Information Administration said on Wednesday the country withdrew nearly 10 million barrels of oil from its Strategic Petroleum Reserve last week for its biggest drawdown on record. U.S. crude inventories also fell by more than expected last week, according to EIA data.
"With the Strait of Hormuz blocked, global refined-product and onshore crude inventories are expected to fall below their lowest levels for this time of year in the past five years by late May and late June," said Mingyu Gao, chief researcher for energy and chemicals at China Futures.
(Reporting by Stephanie Kelly in London, Sam Li in Beijing and Siyi Liu in Singapore; Editing by Clarence Fernandez, Emelia Sithole-Matarise and Susan Fenton)
Copyright Reuters or USA Today Network via Reuters Connect.
This story was originally published May 21, 2026 at 3:17 AM.