(May 26): Oil held a drop on signs that negotiations to extend a US-Iranian ceasefire and reopen the Strait of Hormuz were making progress.
West Texas Intermediate traded near US$91 a barrel, after dropping sharply in the week’s opening session, when the contract did not settle due a US holiday. Talks were “proceeding nicely,” President Donald Trump posted on Monday, while also threatening fresh attacks if they were unsuccessful. Pakistan’s military chief, the main interlocutor, told China an agreement was close.
Still, signs of hostilities remained. Loud explosions were heard around the strait, near the Iranian coastal cities of Sirik and Jask, the semi-official Fars News Agency reported. American and Israeli warplanes had targeted several Iranian vessels south of Larak Island, state-run Nour News reported.
Crude prices — which rallied in March and April — are on pace for a monthly loss in May as a fragile ceasefire and push to reopen Hormuz outweighed signs of fast-depleting stockpiles. The strait, the critical waterway through which a fifth of the world’s oil and liquefied natural gas flowed during peacetime, remains essentially closed, subject to a double blockade by the US and Iran.
In a separate post, Trump said that Tehran’s enriched uranium would preferably be destroyed in Iran, although the material could also be turned over to the US. Washington has cited the Islamic Republic’s nuclear program as a major reason for embarking on the conflict with Israel, maintaining that Tehran poses a threat as it wants to develop nuclear weapons.
The US and Iran have been negotiating a deal that would see them extend the ceasefire for about two months, with the US lifting its blockade and Tehran reopening Hormuz in that time frame. Still, sticking points remain, with Tehran saying it must be able to manage maritime traffic through the chokepoint, something that the US, Arab states and Europe maintain cannot be allowed.
See also: India raises diesel, gasoline prices for fourth time in May
Highlighting additional challenges, Israel said on Monday that it would intensify strikes against Iranian-backed Hezbollah in Lebanon. Tehran has demanded the cessation of hostilities in that country as part of any agreement with the US.
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