Oil prices fell on June 4 as a ceasefire agreement between Israel and Lebanon raised hopes of a broader deal to end the US-Israeli war with Iran, which could lead to the resumption of shipping in the Strait of Hormuz.
Points of attention
- Ceasefire agreement between Israel and Lebanon led to a drop in oil prices, raising hopes for a broader deal to end the US-Israeli war with Iran.
- Potential positive impact on oil markets if an agreement is reached to end hostilities between Washington and Tehran.
Oil is falling in price again: what is the reason?
Brent crude futures fell 87 cents, or 0.89%, to $96.92 a barrel, while U.S. West Texas Intermediate crude fell 78 cents, or 0.81%, to $95.24.
Both Brent and WTI rose about 2% on Wednesday following renewed fighting in the Middle East, including Iranian attacks on Kuwait and US military strikes near the Strait of Hormuz.
Israel and Lebanon said late on June 3 that they had agreed to a ceasefire, raising hopes for a deal between Washington and Tehran, which has partly linked any agreement to a cessation of hostilities between Israel and Lebanon.
US President Donald Trump suggested on Wednesday that progress could be made in talks with Iran as early as this weekend.
Iranian Foreign Minister Abbas Araqchi said on Wednesday that Tehran's contacts with Washington had not been interrupted, but that no progress had been made in the talks. He added that both sides were studying the texts they had exchanged.
In the US, the Republican-led House of Representatives passed a resolution on June 3 that would bar Trump from going to war with Iran. To take effect, the resolution would need Senate approval and a two-thirds majority in both chambers to override a possible Trump veto.
The International Energy Agency warned on June 2 that global oil inventories could reach critical levels ahead of peak summer demand if inventory drawdowns continue at the current pace, despite China's oil imports falling by 6 million barrels per day in May compared to March.
Stockpiles have become a buffer for the oil market. However, even if we see a return to oil supplies through the Strait of Hormuz in the near future, the recovery will be slow and gradual. This suggests that inventories are likely to continue to decline in the third quarter, posing a risk to prices.
