WTI Oil holds above $85 as optimism over a Middle East peace deal begins to wane

• More than $2 above Tuesday’s lows, WTI oil steadies near $85.50.
• Crude prices find modest support as doubts grow over the prospects for Middle East peace talks.
• An unexpected rise in US API oil inventories in the first week of November restrains the recovery in oil prices.
  

A rebound of more than $2 from Tuesday’s lows has brought US benchmark West Texas Intermediate (WTI) oil to around $85.50, where it is consolidating during Wednesday’s European session. Prices have recovered from two-month lows as the lack of progress towards a Middle East peace deal begins to concern investors.

With no meaningful progress in the talks as the days pass, investors are becoming less optimistic about a peace agreement between Washington and Tehran. Attacks on vessels seeking to pass through the Strait of Hormuz are continuing. 

The prospect of renewed attacks on Iran has been played down by US officials, who remain optimistic. Speaking at a G7 meeting in Paris on Tuesday, Secretary of State Marco Rubio said that “there is no need for major combat operations”. President Donald Trump said he was keeping the war at “status quo”, while warning that the US military was “locked and loaded”.

Persistent Strait of Hormuz attacks sustain supply concerns

A fresh attack on an oil tanker northeast of Oman’s coast was reported on Tuesday by the UK Maritime Trade Operations (UKMTO), an organisation monitoring global seaborne trade. The report came shortly after US Defence Secretary Pete Hegseth said that the US controls the Strait of Hormuz. Such incidents have left oil traffic at a trickle through a corridor that carried about 20% of global oil supply before the war. The resulting fears of supply disruption have kept prices between 20% and 60% above pre-war levels for most of the last eight months.

A 9 million barrel increase in crude oil stocks for the week ending 6 November was also reported on Tuesday by the American Petroleum Institute (API). Markets had expected a 1 million barrel drawdown, following the previous week’s 5.2 million barrel decline. The figures have helped to restrain WTI oil’s recovery.