(RTTNews) – Crude oil prices have tumbled on Friday as expectations of the U.S. and Iran signing a Memorandum of Understanding run high. The MoU would allow for immediate reopening of the Strait of Hormuz and pave the way for the resumption of oil and energy trade.
WTI Crude Oil for July month delivery was last seen trading down by $1.65 (or 1.86%) at $87.25 per barrel.
The war between the U.S.-Israeli forces and Iran has entered the fourth month.
Yesterday, Axios reported that the U.S. and Iran have reached a stage to sign a Memorandum of Understanding which would allow immediate reopening of the Strait of Hormuz by Iran and lifting of the naval blockade on Iranian ports by U.S. forces.
Further, the current ceasefire would be extended for 60 days and this time period would be utilized for discussions on Iran’s nuclear program.
The MoU awaited the consent of U.S. President Donald Trump. Axios reported that Trump sought a couple of days’ time from the mediators to review the tenets before endorsing the draft.
Days before, both nations were involved in a short exchange of attacks near the Bandar Abbas port city on the Strait of Hormuz. However, this skirmish did not deter the background negotiations held by both nations through intermediaries.
The 39-kilometer critical chokepoint linking the Persian Gulf to the Gulf of Oman has remained closed since the beginning of the war on February 28, stranding hundreds of vessels carrying oil and energy.
The Foreign Minister of Pakistan Ishaq Dar arrived in the U.S. today to hold talks with U.S. Secretary of State Marco Rubio to continue the negotiations on ending the war.
U.S. Vice President JD Vance stated that the U.S. and Iran are very close to strike a deal though they are not fully there yet.
Though Iranian state media stated that no agreement has been finalized, optimism over talks of a ceasefire extension did not wane and weighed on oil prices.
Through an elaborate post via Truth Social, Trump laid out his conditions and clarified his stance on the proposed U.S.-Iran agreement.
Trump stated that essential elements remain to be worked out though he acknowledged that the negotiations have advanced on lesser issues.
Trump insisted that Iran must not develop or possess a nuclear bomb and called for unearthing the enriched uranium material (Nuclear Dust) from Iran and destroying them totally.
Trump also wanted the immediate reopening of the Strait of Hormuz and unrestricted shipping traffic with no tolls levied. Prior to that, Trump wanted Iran to remove or detonate all the sea mines it had planted earlier.
Trump promised to lift the U.S. naval blockade on Iranian ports if Iran complies with his demands. Lastly, Trump stated he would make a final decision after a meeting in the White House.
Energy agencies have already warned of a rapid depletion in the oil inventories. Experts are concerned that the return of the tanker traffic to pre-war levels would require the clearing of sea mines by Iran and repositioning of the vessels, both of which would take time.
In addition, fleet owners and insurers would need complete reassurance that renewed attacks would not happen. Analysts estimate that nearly a two-month-period from the date of reopening of the strait would be required for buyers to receive oil once again.
Yesterday, on the inventory front, data from the American Petroleum Institute revealed that U.S. crude oil inventories fell by 2,800,000 barrels in the week ending May 22, following a 9,100,000-barrel draw in the previous week.
In addition, the U.S. Energy Information Administration’s data revealed that for the week ending May 22, crude oil inventories in the U.S. decreased by 3,327,000 barrels.
For the same period, gasoline inventories decreased by 2,572,000 barrels, distillate inventories decreased by 2.1 million barrels. However, heating oil inventories rose by 306,000 barrels.
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