Oil Prices Drop as U.S. Weighs Easing Shadow Fleet Sanctions

Oil prices declined sharply on Thursday as reports that the United States may ease sanctions on shadow fleet vessels raised expectations of improved global crude supplies. Investors also awaited an International Energy Agency (IEA) meeting that could determine the timing of additional emergency oil reserve releases.

Brent crude futures dropped 1.66% to $104.31 per barrel by 03:20 GMT, while West Texas Intermediate (WTI) crude futures fell 1.3% to $93.86 per barrel.

The decline followed a Reuters report indicating that President Donald Trump's administration is considering relaxing restrictions on shadow fleet tankers transporting oil from sanctioned countries, including Russia, Iran, and Venezuela.

The potential policy shift follows Washington's temporary suspension of sanctions on Russian diesel exports last week, aimed at easing global fuel shortages. Relaxing restrictions on shadow fleet vessels could reduce elevated shipping costs and help stabilize international oil prices, although no final decision has been announced.

Meanwhile, investors focused on Thursday's IEA meeting in Paris, where officials are expected to discuss a possible additional release of 100 million barrels from emergency reserves. Member countries previously committed to releasing 400 million barrels in response to supply disruptions caused by the U.S.-Iran conflict.

In its latest monthly report, the IEA warned that global diesel supplies could remain constrained through 2027 because of refinery outages and disrupted crude shipments. The agency also projected global oil demand would decline by 2.6 million barrels per day in 2026 as higher energy prices weaken consumption.

Oil prices faced additional pressure from a stronger U.S. dollar after hotter-than-expected American inflation data increased expectations of further Federal Reserve interest rate hikes.

However, escalating Middle East tensions and declining U.S. crude inventories helped limit losses.

Recent attacks in the Strait of Hormuz reportedly sank two commercial vessels, while Yemen's Iran-backed Houthi militants struck Saudi Aramco's headquarters earlier this week, intensifying concerns about regional energy infrastructure.

Separately, American Petroleum Institute data showed U.S. crude inventories plunged 11.12 million barrels during the week ending October 9, compared with expectations for a 1.9 million-barrel increase.

The unexpected decline followed Hurricane Isaias, which disrupted nearly two-thirds of Gulf Coast oil production. Official U.S. government inventory figures are scheduled for release later Thursday.