Oil prices fell on Thursday, erasing earlier gains, after U.S. and Iranian negotiators apparently reached an agreement to extend the ceasefire.
Negotiators reached a 60-day memorandum of understanding to extend the ceasefire and begin negotiations on Iran’s nuclear program, U.S. sources told CNBC. President Donald Trump must still approve the deal, the sources said. Axios was first to report the news.
Brent Crude futures, the international benchmark, fell 93 cents to $93.36 a barrel as of 1:06 p.m. ET. WE West Texas Intermediate Futures lost 7 cents to $88.61 a barrel.
Prices rose on Thursday after the United States and Iran exchanged military strikes. The Revolutionary Guards said they targeted a US air base around 4:50 a.m. local time, without disclosing the location.
WE Central Command later said Iran had launched ballistic missiles towards Kuwait which were successfully intercepted.
The attack came after U.S. forces launched new strikes in Iran against a military site believed to threaten U.S. troops and commercial shipping passing through the Strait of Hormuz, a U.S. official told MS NOW. Several Iranian drones were also reportedly intercepted and shot down.
Oil prices have fallen more than 10% since May 18, when Trump said he canceled an imminent wave of military strikes against Iran to give more time for negotiations.
Secretary of State Marco Rubio said Wednesday that negotiations had made progress. Rubio said Trump preferred diplomacy and would give negotiations with Iran “every chance to succeed.”
The United States and Iran have been in a standoff over the Strait of Hormuz since agreeing to a fragile ceasefire in April.
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Crude oil in the last six months
Iranian state television said on Wednesday that Tehran had agreed in a draft memorandum of understanding with the United States to open the Strait of Hormuz to pre-war levels of commercial maritime traffic, according to Reuters.
But Iran and Oman would manage traffic across the strait under the memorandum of understanding, state television said. The White House dismissed the report, calling it a “complete fabrication.” Trump said later Wednesday that no nation would control shipping through the strait.
Effective control But Mideast leaders already believe Iran has effectively taken control of Hormuz, said Amos Hochstein, who served as a senior energy adviser to former President Joe Biden.
“No matter what happens, the Iranians will control the Strait of Hormuz for the foreseeable future, no matter what the deal says. Everyone in the region believes that,” Hochstein told CNBC.Scream box” THURSDAY.
In a note released late Wednesday, Citigroup said oil markets were finding firmer footing as investors increasingly priced in worst-case supply disruption scenarios as Washington and Tehran moved closer to a deal.
The central bank nevertheless warned that uncertainty over the timing of any deal was keeping central banks on alert, with policymakers weighing the possibility of monetary tightening in response to energy-related inflation risks.
Citi said the prolonged rise in crude prices was starting to translate into broader inflationary pressures, including through “second-round effects”, prompting some central banks to be more hawkish.
“Wall Street wants the war to end, but the reason the war isn’t ending is because of Wall Street,” Hochstein said. “Wall Street wants to believe that what President Trump is saying is true, that we are on the verge of a deal any second, and that this is why oil prices have fallen.”