Oil Steadies After First Drop This Week on Peace Talk Optimism
(Bloomberg) -- Oil steadied after its first decline this week, as optimism over US-Iran peace talks weighed against uncertainty surrounding a ceasefire deal between Israel and Lebanon.
Brent traded around $95 a barrel after falling 2.8% on Thursday, while West Texas Intermediate was near $93. President Donald Trump said that talks with Iran were going well, despite Tehran-backed Hezbollah rejecting a US-brokered ceasefire deal between Israel and Lebanon.
WTI has gained more than 6% this week after uncertainty over the progress of the negotiations eroded some of the earlier optimism for a deal that would lead to a resumption of oil flows through the strait — which carries about a fifth of the world’s crude and liquefied natural gas in peacetime. Futures are still down about a fifth since early April — when the US and Tehran agreed to a ceasefire that ended more than five weeks of fighting.
“The move in WTI from pre-ceasefire highs of $110+ to current levels in the low-$90s was the proverbial low-hanging fruit — signaling the oil market’s relief that all-out war is over, and the region’s oil industry infrastructure has been mostly unscathed,” said Pavel Molchanov, an analyst at Raymond James. “Further price declines will hinge on meaningful recovery in Hormuz shipping volumes.”
There was no sign of progress in talks between Tehran and Washington, with Israel’s continued military strikes in Lebanon becoming a major sticking point. Asked by reporters Thursday in the Oval Office about Hezbollah’s rejection of the Lebanon ceasefire, Trump said “they didn’t reject me” and claimed “they called us” to discuss a cessation of hostilities.
In the Middle East, Oman’s main crude oil export terminal at Mina Al Fahal has delayed loadings after an explosion disrupted port operations, according to traders familiar with the matter. The facility sits outside of the Strait of Hormuz and is one of the few remaining points Middle Eastern crude oil can still be loaded amid the war.
“The mixed messaging on peace talks is not really bearish for oil yet. It probably just stops prices from running too far on the upside for now,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “Traders can take out a bit of the war premium when headlines sound constructive, but until there is real progress on the ground, it is hard to say the risk premium is gone.”
On Thursday, Trump said in a social media post that he’s “right in the middle of my final negotiations to end the War with the Islamic Republic of Iran.” He didn’t elaborate on the talks, using the post to blast a vote by the Republican-led House of Representatives to halt the war.
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