NEW YorK: Oil prices were little changed after a volatile trading day as traders digested news that the US and Iran have reached a tentative deal to extend a ceasefire and work toward a pact to end the war.
West Texas Intermediate rose 0.3% to settle under US$89 a barrel. Brent crude, the global benchmark, slipped to just below US$94. Prices earlier swung between gains and losses.
Axios reported that the memorandum of understanding would extend the ceasefire for 60 days and state that shipping through the vital Strait of Hormuz would be "unrestricted,” without any tolls paid to Tehran. Trump still needs to approve the terms and has asked for "a couple of days” to decide, according to the report.
An agreement to extend the truce would represent a diplomatic breakthrough and potentially bring the US and Iran closer to resuming normal maritime traffic through the strait, which usually carries around a fifth of the world’s oil and liquefied natural gas supply.
Resuming flows through the chokepoint would help alleviate a months-long energy crisis that has sent fuel costs surging globally. But further intensive negotiations over Tehran’s nuclear program would be needed to reach a final peace deal, even if a preliminary pact is reached.
"I remain very cautious around a potential deal, but we will see if any confirmations come and if flows actually pick up through the strait,” said Ryan McKay, senior commodity strategist at TD Securities. "Regardless of if the deal is real, inventory declines are set to persist for months.”
Iran would have to remove all mines from the strait within 30 days under the preliminary agreement, but Tehran has not confirmed that it is prepared to sign the potential deal, according to Axios.
Fada-Hossein Maleki, an Iranian lawmaker and member of the country’s parliamentary commission for national security, said the negotiations have shown "significant progress” and that the US has accepted most of Iran’s demands, according to the semi-official Iranian Students’ News Agency.
The US still has to decide on a number of Iran’s conditions, the ISNA quoted Maleki as saying, without giving details.
Meanwhile, Treasury Secretary Scott Bessent on Thursday insisted that Trump’s three "red lines” - reopening Hormuz, Iran turning over highly enriched uranium and ending its nuclear program - remain necessary for any pact.
The news of a potential deal, which followed overnight clashes between the US and Iran, overshadowed an Energy Department report showing that US crude stockpiles dropped by 3.3 million barrels last week. Drivers showed few signs of cutting back on mileage before Memorial Day weekend. — Bloomberg
