Oil rises from six-week low amid uncertainty over US-Iran deal

Oil rose from a six-week low amid uncertainty over the outlook for a peace deal to end the war in Iran.

Brent advanced toward $93 a barrel after closing at its lowest since mid-April on Friday, while West Texas Intermediate was near $89. The US and Iran traded messages over the weekend seeking changes to a draft agreement that would extend a ceasefire and open the Strait of Hormuz, but it was unclear if the sides were making much progress.

The standoff follows a bout of optimism that some form of peace agreement would be reached — and that energy flows would resume through the Strait of Hormuz — that had caused the first monthly drop in crude prices this year. Brent is still up more than a quarter since the war started at the end of February, as the near-total closure of the vital waterway causes unprecedented turmoil in oil markets.

“Neither Iran nor the US are capitulating or compromising on their red lines for an agreement,” said Hamzeh Al Gaaod, an independent economist for the Middle East and North Africa region. Oil prices are likely to continue moving through a “statement cycle,” with prices swinging between optimism and caution as new headlines emerge, he said.

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President Donald Trump said his proposed deal states clearly “that Iran will not have a Nuclear Weapon,” according to a post on Truth Social.

Trump hadn’t spoken on the subject of Iran since a White House Situation Room meeting Friday, in which he said he expected to announce an agreement to prolong the current truce with Iran by 60 days. In a social media post earlier that day he reiterated his demands, including that Iran suspend its nuclear program and fully restore the strait to its earlier status as a free, international waterway.

The semi-official Tasnim news agency, which has close ties to the Iranian Revolutionary Guard Corps, said Sunday that amendments continue to be proposed by each side, but noted that both the US and Iran might ultimately reject the changes and the deal would collapse.

“Even after the recent selloff, oil is still trading at a pretty elevated level,” said Haris Khurshid, chief investment officer at Chicago-based Karobaar Capital LP. “This suggests the market isn’t pricing peace yet, it’s just pricing a lower probability of the worst case scenario.”

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Meanwhile, Israel made its broadest incursion into Lebanon in a quarter-century as Hezbollah — Iran’s most powerful regional ally — stepped up attacks on Israel’s north. Tel Aviv is not party to the talks between Washington and Tehran and it’s not clear whether it will agree to stop its side war in Lebanon.

Roughly one-quarter of the non-Iranian large oil tankers trapped inside the Persian Gulf at the outbreak of the Iran war have managed to slip out in a slow, stealthy trickle. However, several vessels transiting through the Strait of Hormuz had been attacked in recent days, underscoring the “very real” risks that remain for shipowners, Chevron Corp. Chief Executive Officer Mike Wirth said Friday.

Goldman Sachs Group Inc. sees two-sided risks to oil prices as a slump in demand competes with supply losses from the Middle East because of the Iran war. Weak April oil sales data from China and Western Europe adds about $10 a barrel of downside risk to the bank’s forecast of Brent crude prices of $90 a barrel in the fourth quarter, according to a May 31 note.

Prices:

Brent for August settlement rose 2.5% to $93.40 a barrel at 10:09 a.m. in Singapore.
WTI for July delivery climbed 2.9% to $89.92 a barrel.

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