Oil prices fall on Thursday

Oil prices fell on Thursday as a ceasefire deal between Israel and Lebanon raised hopes for a broader agreement to end the US-Israeli war with Iran that could lead to a reopening of the Strait of Hormuz.

Brent crude futures fell 87 cents, or 0.89 per cent, to $96.92 a barrel by 0458 GMT, while US West Texas Intermediate crude dropped 78 cents, or 0.81 per cent, to $95.24, trimming earlier weekly gains. Both benchmarks had risen about 2 per cent on Wednesday amid renewed Middle East tensions, including Iranian attacks on Kuwait and US strikes near the Strait of Hormuz.

Israel and Lebanon said late Wednesday they had agreed to a ceasefire, raising expectations of progress in talks between Washington and Tehran. Iran has linked any agreement in part to an end to the Israel-Lebanon fighting. US President Donald Trump said negotiations with Iran could see progress as soon as this weekend. Iranian Foreign Minister Abbas Araqchi said contacts with Washington have not been cut off but no progress has been made, with both sides reviewing exchanged texts.

In Washington, the Republican-led House approved a resolution aiming to block Trump from continuing the war against Iran, though it would need Senate approval and a two-thirds majority in both chambers to override a likely veto.

US crude inventories fell by 8 million barrels to 433.7 million barrels in the week ended May 29, according to the Energy Information Administration, a larger-than-expected draw compared with forecasts of 4 million barrels. The International Energy Agency warned that global oil inventories could tighten ahead of peak summer demand if draws continue, despite a reported decline in Chinese crude imports.

ING said inventories have cushioned the market but any reopening of the Strait of Hormuz would likely lead to only a slow and gradual recovery in flows, suggesting continued tightening into the third quarter and upside risk to prices.

Attribution: Reuters