(RTTNews) – Crude oil prices fell on Friday amid expectations that a memorandum of understanding would be signed between the US and Iran. The MoU will allow the immediate reopening of the Strait of Hormuz and pave the way for the resumption of oil and energy trade.
WTI crude oil for July delivery was last seen trading at $87.25 per barrel, down $1.65 (or 1.86%).
The war between US-Israeli forces and Iran has entered its fourth month.
Yesterday, Axios reported that the US and Iran have reached a stage to sign a memorandum of understanding that would allow Iran to immediately reopen the Strait of Hormuz and lift the naval blockade on Iranian ports by US forces.
Additionally, the existing ceasefire will be extended for 60 days and this time period will be used to discuss Iran’s nuclear program.
The MoU is awaiting the consent of US President Donald Trump. Axios reported that Trump asked mediators for a few days to review the principles before endorsing the draft.
A few days earlier, both countries were briefly involved in attacks near the port city of Bandar Abbas on the Strait of Hormuz. However, the clash did not affect the background talks being held by the two countries through mediators.
The vital 39-kilometre chokepoint linking the Persian Gulf to the Gulf of Oman has been closed since the start of the war on February 28, stranding hundreds of ships carrying oil and energy.
Pakistan Foreign Minister Ishaq Dar arrived in the US today to hold talks with US Secretary of State Marco Rubio to continue talks on ending the war.
US Vice President JD Vance said the US and Iran are very close to signing a deal, although they are not quite there yet.
Although Iranian state media said no deal had been finalized, optimism over ceasefire extension talks did not diminish and oil prices were hit.
Through a detailed post via Truth Social, Trump laid out his terms and clarified his stance on the proposed US-Iran deal.
Trump said essential elements remain to be worked out, although he acknowledged that talks have made progress on lesser issues.
Trump insisted that Iran should not develop or possess a nuclear bomb and called on Iran to extract enriched uranium materials (nuclear dust) and destroy them completely.
Trump also wanted the Strait of Hormuz to be immediately reopened and for unrestricted shipping traffic without imposing any tolls. Before that, Trump wanted Iran to remove or explode all the sea mines that it had planted earlier.
Trump promised to lift the US naval blockade of Iranian ports if Iran agreed to his demands. Finally, Trump said he would take a final decision after the meeting at the White House.
Energy agencies have already warned of a rapid depletion of oil reserves. Experts worry that returning tanker traffic to pre-war levels will take time, both of which would require Iran to clear sea mines and reposition ships.
Furthermore, fleet owners and insurers will need absolute assurance that renewed attacks will not occur. Analysts estimate that a period of about two months will be needed from the date of reopening of the strait for buyers to once again get access to oil.
Yesterday, on the inventories front, data from the American Petroleum Institute showed that US crude oil inventories fell by 2,800,000 barrels in the week ended May 22, from a decline of 9,100,000 barrels in the previous week.
In addition, US Energy Information Administration data showed that for the week ending May 22, US crude oil inventories 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 stockpiles increased by 306,000 barrels.
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