Oil Prices Rebound Amid Uncertainty Over Iranian Peace Deal and Inventory Drawdowns

Global Oil Prices Rebound Amid Uncertainty Over Iran War

Oil prices rebounded on Thursday after two days of losses, driven by concerns over the uncertain outlook for an end to the Iran war and a U.S. inventory draw that raised worries about the depletion of global stockpiles.

Brent crude futures rose 81 cents, or 0.77%, to $105.83 a barrel by 0055 GMT, while U.S. West Texas Intermediate futures were up 97 cents, or 0.99%, at $99.23. This rebound comes after both benchmarks dropped more than 5.6% on Wednesday in response to U.S. President Donald Trump's comments on negotiations with Iran.

The Iran war, which began on February 28, has forced countries to rapidly deplete their commercial and strategic inventories, raising concerns about draining them. The U.S. Energy Information Administration reported that the country withdrew nearly 10 million barrels of oil from its Strategic Petroleum Reserve last week, the biggest drawdown on record.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

In response to the U.S. and Israel attacks that started the war, Iran effectively closed the Strait of Hormuz, a crucial waterway that carried oil and liquefied natural gas shipments equal to about 20% of global consumption. Iran has since announced a new "Persian Gulf Strait Authority," saying there would be a "controlled maritime zone" in the Strait of Hormuz.

The U.S. has blockaded Iran's coastline, and while most of the fighting has stopped since an April ceasefire, Iran is limiting traffic through Hormuz. This has led to supply losses from the key Middle Eastern region, forcing countries to rapidly deplete their inventories.

Commercial crude inventories fell by 7.9 million barrels to 445 million barrels last week, compared with analysts' expectations in a Reuters poll for a 2.9 million-barrel draw. Gasoline inventories fell by 1.5 million barrels, while distillates rose by 372,000 barrels.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Analysts are warning that the drawdown in oil inventories will make it difficult for oil prices to remain low, particularly with the Strait of Hormuz blocked. Global refined-product and onshore crude inventories are expected to fall below their lowest levels for this time of year in the past five years by late May and late June.