Brent crude rebounds after 8% crash rocks global oil trade

Oil prices recovered slightly from Wednesday’s rout as investors weighed the prospect of a successful peace deal between the US and Iran. 

The price of West Texas Intermediate crude oil was at $95.57 per barrel, up 0.5%, while Brent was last at $101.88 per barrel, up 0.6% from the previous close. 

Both benchmarks initially slumped over 8% on Wednesday, reaching two-week lows due to optimism surrounding a potential end to the Middle East conflict. 

However, they later pared some losses.

This reversal followed comments from US President Donald Trump, who stated it was "too soon" for direct talks with Tehran, and a senior Iranian lawmaker's remark that the US proposal was more of a "wish list" than a concrete reality.

Negotiation update and peace framework

The current understanding of the potential peace framework is structured around several key components: a moratorium on Iranian nuclear enrichment, sanctions relief, and a 30-day window for negotiations. 

Concurrently, the gradual reopening of the Strait of Hormuz is planned to be phased in over that same 30-day period.

“This is not a resolution, it is a structured pause, a distinction that matters enormously for physical barrels,” Rystad Energy said in its latest commentary.

On Wednesday, Iran announced it is reviewing a US peace proposal.

According to sources, this proposal would officially conclude the war but would not resolve the main US demands: that Iran halt its nuclear program and reopen the Strait of Hormuz.

According to Iran's ISNA news agency, an Iranian foreign ministry spokesperson stated that Tehran would deliver its response.

Meanwhile, Trump expressed his belief that Iran desired an agreement.

Sources involved in the negotiations—specifically a Pakistani mediation source and another person briefed on the talks—indicated that a one-page memorandum, which would formally conclude the conflict, was nearing agreement.

Citing sources, the US media outlet Axios reported that America anticipates Iran's response within the next 48 hours on several critical issues.

This development, according to the sources, marks the closest the parties have come to reaching an agreement since the start of the war.

Future supply outlook and inventory drawdowns

Oil supplies are projected to tighten further in the coming weeks, even if a peace agreement is reached. \

This is due to the anticipated delay in resuming oil shipments from the Middle East Gulf, which will take weeks to reach refiners globally. 

Consequently, oil companies will continue to draw down storage inventories to satisfy peak summer demand.

US crude and fuel inventories dropped again last week, according to the Energy Information Administration (EIA) on Wednesday. 

The decline reflects efforts by countries to counter supply disruptions stemming from the Iran crisis. Crude stocks decreased by 2.3 million barrels, reaching 457.2 million barrels.

This was a smaller reduction than the 3.3 million-barrel draw analysts had anticipated in a Reuters poll.

“Surging energy costs have already begun to create demand destruction globally. And even if the Strait reopens, normalisation in shipping and trade flows could take months,” said David Morrison, senior market analyst at Trade Nation. 

“Oil inventories are not critically low, but uneven distribution and declining buffers continue to raise concerns about localised shortages.”