Oil Confused About Direction, Catalyst Still Uncertain!
Oil prices edged higher in early trading on Thursday (May 21), after a sharp drop earlier, following President Donald Trump's comments that the US was in the "final stages" of negotiations with Iran. Brent crude was trading above $105 per barrel, while West Texas Intermediate (WTI) was nearing $99 per barrel.
Trump's comments fueled hopes of a deal between Washington and Tehran that could allow oil flows through the Strait of Hormuz to resume in the near future. Reopening this vital waterway has the potential to lower the risk premium on oil prices, which had soared due to supply disruptions.
Despite the optimism, the market remains volatile due to conflicting news about the status of the negotiations. Oil prices remain more than 40% higher than before the conflict began in late February. Traders continue to weigh the possibility of a sudden de-escalation, including a deal that would lift the oil blockade in the Persian Gulf.
Rabobank energy expert Joe DeLaura emphasized that even if a deal is reached, “the physical market remains chaotic” because oil can take up to 55 days to reach its destination, meaning stocks will continue to decline during that period. Abu Dhabi National Oil Co. CEO Sultan Al Jaber added that Middle East oil flows will not fully recover until 2027.
U.S. crude oil inventories fell by about 7.9 million barrels last week, in line with previous estimates. Some early signs of increasing oil flows through the Strait of Hormuz are also starting to lower risk premiums. Iran reported 26 vessels passing through the channel in the past 24 hours, although tracking data suggests fewer.
Trump has stated that an agreement will be reached, or decisive action could be taken if Iran does not accept U.S. terms. Iran is still reviewing the latest U.S. draft and has not yet issued a formal response, threatening retaliation outside the Middle East in the event of a U.S. or Israeli attack. Brent crude futures for July rose 0.7% to $105.78, while WTI rose 0.9% to $99.19 per barrel.
Key Points:
- Oil edged higher after falling sharply on Trump's comments.
- Hopes for a US-Iran deal support oil flows through the Strait of Hormuz.
- The market remains uncertain due to ongoing negotiations.
- US oil inventories are falling, and Persian Gulf distribution remains delayed.
Investors are monitoring diplomatic moves and the potential for conflict escalation. (asd)*
Source: Newsmaker.id
