West Texas Intermediate slipped about 1% toward $101.60 after reports that Vice President JD Vance wrote to Iran's security chief. The Associated Press reported that U.S. officials warned regional allies of possible military action after Nov. 3. Russian refining is also coming back.
Oil traders went to bed on Wednesday with two very different signals from Washington about Iran. Prices fell after the softer one was reported.
West Texas Intermediate crude was at $101.64 a barrel at 4:48 a.m. Eastern on Thursday, down about 1.1%, after trading between $101.03 and $102.31 overnight. Brent was near $114.10, down about 1.1%. Heating oil futures fell about 9 cents to $4.57 a gallon. Gold slipped about 0.3% to $4,040 an ounce.
The diplomacy signal
The Wall Street Journal reported that Vice President JD Vance had sent a letter to Mohsen Rezaei, secretary of Iran's Supreme National Security Council, seeking to revive negotiations. The letter was sent the previous week through Qatari mediators and delivered on Sunday, according to other reports, and calls for talks that would include the nuclear issue.
The authorship of the outreach is disputed. The Journal reported that the letter was sent at President Trump's direction. Asked whether he had directed peace talks, Trump said no, describing a narrower purpose: "They need help with medical supplies and various things... I said, 'if you want to do that, that's OK.'" Iranian official Araghchi said on X that Tehran "continues to give diplomacy a chance to succeed."
The strike signal
Late Wednesday, two diplomats told the Associated Press that U.S. officials had advised regional allies "to be prepared for potential renewed military action against Iran after next week's midterm elections," and urged precautions against retaliation on "energy facilities and other crucial infrastructure." The diplomats said Trump had not made a final decision.
That warning describes a specific window, the days after the Nov. 3 vote, and a specific risk to the region's oil infrastructure. It arrived the same evening as the letter. Bloomberg and Reuters tied oil's decline to the diplomacy reports, and prices stayed lower after the AP report was published.
Supply outside the Gulf
Part of the reason the premium can ease is that supply elsewhere is recovering. JPMorgan analysts said Russian refinery runs rebounded by 350,000 barrels a day last week to 4 million barrels a day, with no confirmed attacks on Russian refining since an Oct. 15 strike on the Ryazan refinery. That adds fuel products to a market that has been tight for diesel and heating oil.
At the same time, one buffer is running out. UBS analyst Staunovo said pledged releases from strategic oil reserves are "largely completed," and he expects Brent near $110 by the end of the year. Saudi Arabia has still not confirmed any damage at its Ras Tanura facility.
Is the risk fading or scheduled?
The case that the risk premium is fading: a direct channel to Tehran's security establishment is open, Iran says it is still pursuing diplomacy, Russian refining is recovering and the price is lower than it was on Wednesday.
The case that it is only postponed: allies have been told to prepare for strikes after a specific date, the warning names energy infrastructure as a likely target, the president has disowned the peace framing of the letter, and emergency reserve releases that cushioned the market are winding down.
What to watch
Any Iranian reply to the Vance letter, Iran's response to the Qatari mediation proposal expected by the end of the week, U.S. statements in the days after the Nov. 3 elections, Russian refinery runs, and confirmation or denial of damage at Ras Tanura.