(June 4): Oil slipped after three days of gains after the US said Israel and Lebanon agreed to a ceasefire, which would remove a key sticking point in talks between Washington and Tehran.
West Texas Intermediate fell toward US$95 a barrel, after rising almost 10% in the week’s first three sessions, while Brent settled near US$98 on Wednesday. “The ceasefire is contingent on a complete cessation of Hizbollah fire and the evacuation of all Hizbollah operatives from the South Litani Sector,” the US State Department said.
While the US and Iran have agreed on a rough framework to extend their truce by two months and reopen the Strait of Hormuz, negotiations over the final details are dragging on, even as the two sides stepped up strikes. “No tangible progress has been achieved” in talks with Washington and Tehran is prepared to target objectives inside Israel if its attacks on Beirut continue, the semi-official Tasnim news agency reported the Islamic Republic’s foreign minister as saying.
Oil has erased last week’s drop as a flare-up in clashes evaporated optimism over a deal to extend the current ceasefire, and potentially see flows resume through the strait. As talks drag on, the world’s supply cushion is rapidly running out — with US government data on Wednesday showing crude stocks at Cushing, Oklahoma, the delivery point for WTI, fell for a sixth week to near what is known as a minimum operating level.
US President Donald Trump said the Strait of Hormuz would open “immediately” upon Iran signing a memorandum of understanding to cease armed hostilities “subject to a couple of areas being cleaned out, also of mines.” He downplayed the threat of mines in the strait to commercial shipping.
The oil market’s main focus remains the key waterway, through which one-fifth of global crude normally passes. The effective paralysis of the chokepoint under a double blockade by Tehran and Washington has sent fuel prices higher, as vessel movements remain limited.
See also: Oil steadies after first drop this week on peace talk optimism
Meanwhile, the Republican-led House voted to halt the US war with Iran, showing that worries over the conflict are spreading in the president’s own party five months before congressional elections. The ballot won’t end American military attacks on the Islamic Republic, as the Senate would still have to pass the resolution and provisions in the 1973 War Powers Act that the House invoked are legally controversial anyway.
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