Oil drops on lower demand forecasts despite deadlock in US-Iran talks

Oil prices experienced a drop of more than $1 on Thursday, driven by revised global oil demand projections for 2026. Forecasters cited disruptions stemming from the U.S.-Israeli war on Iran as a key factor, although supply constraints related to the conflict provided some support for the market.

Brent crude futures fell 1.5%, settling at $87.69 a barrel, while U.S. West Texas Intermediate (WTI) crude decreased by 1.6% to $81.97. The Organization of Petroleum Exporting Countries (OPEC) lowered its world oil demand growth forecast for 2026 to 580,000 barrels per day in its latest monthly report. Concurrently, the International Energy Agency (IEA) anticipates a 1.6 million bpd contraction in consumption this year, a downward revision from its previous forecast of 1 million bpd, attributing this to restricted fuel supplies and higher prices resulting from the conflict.

Adding pressure to oil prices was a surprising increase in U.S. commercial crude oil inventories. The Energy Information Administration (EIA) reported the largest weekly gain since January 2023, with inventories rising by 17.4 million barrels to 424.4 million barrels for the week ended August 7. This build exceeded analysts' expectations of a 1.4 million-barrel draw.

However, the market remains sensitive to the stalled negotiations between Iran and the U.S. aimed at ending the war in the Gulf. A senior Iranian source indicated on Wednesday that no progress had been made in talks to revive an interim deal and establish an implementation timeline. Furthermore, recent attacks on shipping in the Strait of Hormuz and the Bab el-Mandeb Strait, critical export routes for Middle Eastern oil and gas, underscore the persistent risks to crude supply from the region. Analysts at Haitong Futures noted that the deteriorating safety situation for navigation in these waters forces vessels to disable their signals, reducing transparency and complicating the tracking of actual supply levels.

“

The safety situation for navigation in these waters has further deteriorated, forcing vessels to turn off their signals, which reduces transparency in shipping and makes it more difficult for the market to track and assess actual supply levels