TOKYO: Oil prices edged higher on Wednesday, recovering part of the sharp losses recorded in the previous two sessions, as investors weighed the prospects of a lasting peace agreement between the United States and Iran and the potential reopening of the strategically vital Strait of Hormuz.
Brent crude futures rose 47 cents, or 0.6 percent, to $79.43 per barrel, while U.S. West Texas Intermediate (WTI) crude gained 48 cents, or 0.6 percent, to $76.53 per barrel during early Asian trading.
Both benchmarks had plunged nearly 5 percent on Tuesday, extending losses for a second consecutive session and falling to their lowest levels in three months amid expectations that an emerging U.S.-Iran agreement could restore oil shipments through the Strait of Hormuz.
“Oil markets retreated on expectations that the Strait of Hormuz would reopen following the peace agreement, but traders remain cautious and are awaiting further details before extending selling pressure,” said Hiroyuki Kikukawa, Chief Strategist at Nissan Securities Investment.
He noted that WTI crude is likely to remain highly volatile, fluctuating within a range of around $10 above or below the $80-per-barrel mark.
Details of the interim peace arrangement began emerging on Tuesday. U.S. President Donald Trump stated that the agreement would prevent Tehran from developing nuclear weapons, while a U.S. official indicated that Iran would be permitted to resume oil exports once the deal is formally signed.
The memorandum of understanding, which has not yet been made public, extends a fragile ceasefire announced in April by an additional 60 days, allowing both sides to pursue negotiations toward a permanent settlement.
Under the proposed agreement, the United States would lift restrictions on Iranian ports, while Tehran would facilitate the passage of oil tankers through the Strait of Hormuz, a key global energy transit route that has faced significant disruptions since U.S. and Israeli strikes on February 28.
Despite the positive market sentiment, industry experts caution that Iran’s oil sector may take weeks or even months to fully restore production and refining operations to pre-conflict levels.
Adding to uncertainty, Israel has distanced itself from both the April ceasefire and the latest U.S.-Iran agreement, raising concerns about the durability of the truce. On Tuesday, Israeli drone strikes reportedly targeted vehicles in southern Lebanon, killing at least four people and injuring several others, according to Lebanon’s National News Agency.
Meanwhile, economic data from China showed that crude oil processing in May fell 9.1 percent year-on-year to its lowest level in nearly four years, suggesting that refiners may have begun drawing down inventories amid supply disruptions linked to the Iran conflict.
Supporting oil prices, data from the American Petroleum Institute (API) indicated that U.S. crude inventories declined by 8.3 million barrels in the week ended June 12, significantly exceeding market expectations for a 4.6 million-barrel draw. Investors are now awaiting official inventory figures from the U.S. Energy Information Administration (EIA) for further direction.
Analysts expect oil markets to remain sensitive to developments surrounding the U.S.-Iran negotiations, regional security conditions, and the status of maritime traffic through the Strait of Hormuz, one of the world’s most critical oil supply routes.
By Reuters
