Oil prices fell on Thursday as a ceasefire deal between Israel and Lebanon boosted hopes for a broader agreement to end the US-Israeli war with Iran that could lead to a reopening of the Strait of Hormuz.
Brent futures were down 87 cents, or 0.89%, at $96.92 a barrel by 0458 GMT, while U.S. West Texas Intermediate crude fell 78 cents, or 0.81%, to $95.24, paring gains from earlier in the week.
Both Brent and WTI rose about 2% on Wednesday after renewed Middle East hostilities, including Iranian attacks on Kuwait and US military strikes near the Strait of Hormuz.
Israel and Lebanon said late on Wednesday they had agreed to implement a ceasefire, raising hopes for a deal between Washington and Tehran, which has conditioned any agreement in part on an end to fighting between Israel and Lebanon.
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US president Donald Trump suggested on Wednesday that there could be progress in negotiations with Iran as soon as this weekend.
Iranian foreign minister Abbas Araqchi on Wednesday said Tehran’s contacts with Washington have not been cut off, but no progress has been made in the negotiations, adding both sides were studying the texts that were exchanged.
In the US, the Republican-led House approved a resolution on Wednesday to block Trump from continuing the war against Iran. To take effect, the resolution would need Senate approval and two-thirds majorities in both chambers to override an almost certain Trump veto.
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Meanwhile, US crude stockpiles fell by 8 million barrels to 433.7 million barrels in the week ended May 29th, the Energy Information Administration said on Wednesday. That was a much bigger drop than the 4-million-barrel draw analysts had expected in a Reuters poll.
The International Energy Agency warned on Tuesday that global oil inventories could hit critical levels ahead of peak summer demand if stock draws continue at their current pace, despite Chinese crude imports falling by 6 million barrels a day in May compared to March.
“Inventories have provided a cushion for the oil market. However, even if we see an imminent restart of oil flows through the Strait of Hormuz, the recovery will be slow and gradual,” a note from ING said.
“This suggests inventories are likely to continue to tighten into the third quarter, leaving upside risk to prices.” - Reuters
