Oil swung between gains and losses as traders assessed the outlook for a peace deal to end the war between the US and Iran.
West Texas Intermediate traded around $96 a barrel. Pakistan’s army chief, the favored interlocutor between Washington and Tehran, arrived in the Iranian capital amid signals of progress in talks to end the war and ultimately reopen the vital Strait of Hormuz to energy flows.
Iran said the latest proposal from the US partly bridged the gap between the warring sides, but comments from the Islamic Republic’s supreme leader about keeping Tehran’s uranium stockpile and a dispute over tolls in the Strait of Hormuz clouded the outlook for a breakthrough. Meanwhile, the United Arab Emirates has made a more concerted push to end the war in recent days.
“Near term, oil futures seem to be pricing in some sort of an agreement as WTI prices pull back below $100/bbl,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities Inc. “Still, traders are becoming more desensitized to the ongoing negotiation headlines.”
Conflicting statements on key issues left it unclear whether the two sides were any closer to a deal after renewed threats of escalation in recent days, buffeting oil prices as traders try to gauge when oil and liquefied natural gas shipments through the strait will fully resume.
The war and the curtailment in supplies have seen global stockpiles of crude oil and products being drawn down at a record pace, according to Goldman Sachs Group Inc.
“Should no agreement emerge between the parties to the conflict, and should passage through the Strait of Hormuz therefore remain severely restricted for the time being, stock levels will come under increased scrutiny,” Commerzbank AG analysts including Barbara Lambrecht and Carsten Fritsch wrote in a note.
The International Energy Agency remains ready to free further stockpiles if needed, after a first release in March, Executive Director Fatih Birol said Thursday.
Meanwhile, US consumers are continuing to feel the impact of energy inflation. Gasoline prices stood at $4.55 a gallon as of Thursday, according to the American Automobile Association — the highest ahead of Memorial Day in four years. Consumer sentiment fell to a record low as long-term inflation expectations worsened.
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