Oil prices fell more than 1% on Thursday as weaker global demand forecasts for 2026 outweighed ongoing supply risks stemming from the US-Israeli war on Iran.
Brent crude futures fell US$1.29 or 1.5% to US$87.69 a barrel by 0100 GMT, while US West Texas Intermediate (WTI) crude declined US$1.30 or 1.6% to US$81.97.
The Organisation of Petroleum Exporting Countries (OPEC) lowered its forecast for global oil demand growth in 2026 to 580,000 barrels per day in its monthly market report on Wednesday.
The International Energy Agency (IEA) also expects global oil consumption to contract by 1.6 million barrels per day this year, deeper than its previous forecast of a 1 million bpd decline. It attributed the downgrade to restricted fuel supplies and higher prices caused by the conflict.
US crude inventories added further pressure to prices after commercial stockpiles recorded their biggest weekly increase since January 2023.
The Energy Information Administration said inventories rose 17.4 million barrels to 424.4 million barrels in the week ended Aug 7, their highest level since June 5. Analysts polled by Reuters had expected a 1.4 million-barrel draw.
However, supply concerns continued to put a floor under prices as US-Iran talks remained deadlocked.
A senior Iranian source said on Wednesday that there had been no progress in efforts to revive an interim agreement reached in June and establish a timeline for its implementation.
Attacks on shipping in the Strait of Hormuz and the Bab el-Mandeb Strait on Tuesday also highlighted the risks to Middle Eastern oil and gas supplies, with both routes crucial to regional energy exports.
Haitong Futures analysts said the deteriorating safety situation had forced vessels to switch off their signals, reducing shipping visibility and making it harder for markets to assess actual supply levels.
