Oil prices moved lower during Asian trading on Thursday as investors weighed ongoing uncertainty over West Asian supplies against a weakening outlook for global crude demand.
Brent crude futures slipped 0.16% to $88.87 a barrel by 01:50 ET (05:50 GMT), while West Texas Intermediate crude futures fell 0.3% to $83.02 a barrel.
Both benchmarks had dropped by more than 1% earlier in the session before recovering part of their losses.
Oil Markets Remain Volatile Over Strait of Hormuz
Crude prices initially extended losses following a volatile Wednesday session. Conflicting statements from the United States and Iran regarding the Strait of Hormuz triggered sharp swings across oil markets.
Despite Thursday’s decline, oil prices remained significantly higher over the past week as tensions between Washington and Tehran showed little sign of easing.
Progress toward fully reopening the Strait of Hormuz has also remained limited.
U.S. and Iran Remain Divided Over Hormuz
Both the United States and Iran have claimed control over the strategically important waterway.
However, shipping data indicated that activity in the region had slowed sharply following increased military action during late July and early August.
The Strait of Hormuz has become one of the most important drivers of oil prices this year. Before the Iran conflict, roughly 20% of global oil consumption passed through the route.
Any prolonged disruption therefore raises concerns about global energy supplies and can quickly increase volatility in crude prices.
Red Sea Attacks Add to Supply Concerns
Supply risks have also increased elsewhere in the region.
Iran-backed Houthi forces in Yemen have resumed attacks on vessels operating in the Red Sea and Bab el-Mandeb Strait.
The Bab el-Mandeb is another strategically important shipping route for global energy markets. Disruptions there could further complicate the transportation of crude oil and refined products.
As a result, geopolitical risks continue to provide some support for oil prices despite growing concerns about demand.
OPEC Cuts 2026 Oil Demand Growth Forecast
Weakening demand expectations are creating pressure in the opposite direction.
The Organization of the Petroleum Exporting Countries (OPEC) lowered its forecast for global oil demand growth in 2026 in its latest monthly report.
OPEC now expects demand to increase by around 580,000 barrels per day, marking the organization’s fourth downward revision this year.
The repeated cuts highlight growing concerns that slower global economic activity could limit energy consumption.
IEA Also Turns More Cautious on Oil Demand
The International Energy Agency (IEA) also lowered its oil demand outlook.
The agency now expects global oil demand to decline by approximately 1.6 million barrels per day this year, compared with an earlier forecast for growth of around 1 million barrels per day.
Both OPEC and the IEA highlighted several risks affecting demand, including weaker economic growth, tighter fuel availability and higher energy prices associated with the conflict involving Iran.
The weaker forecasts have added pressure to crude prices even as geopolitical risks threaten global supplies.
U.S. Oil Inventories Rise Sharply
Oil prices also faced pressure from a surprisingly large increase in U.S. crude inventories.
Data showed that U.S. oil stockpiles increased by 17.4 million barrels last week, significantly adding to available commercial supplies.
However, separate figures showed a sharp decline in the U.S. Strategic Petroleum Reserve (SPR).
Washington has made substantial use of the reserve this year in an effort to cushion the domestic market from supply disruptions linked to the Iran conflict.
Oil Traders Balance Supply Risks Against Weak Demand
The oil market is currently being pulled in two opposing directions.
Geopolitical tensions surrounding the Strait of Hormuz, the Red Sea and other important shipping routes continue to create significant supply risks.
At the same time, weaker global demand forecasts and rising U.S. inventories are limiting the potential for a stronger rally.
For now, traders are likely to remain focused on developments involving the United States and Iran, shipping activity through the Strait of Hormuz, global demand forecasts and changes in U.S. crude stockpiles.
