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EMEA Oil Update: Brent Recovers Amid Disputed US-Iran Peace Terms

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Brent futures recovered on Friday after dropping to its lowest since May 8 in the previous session as traders assessed disagreements over Iranian uranium stockpiles between US and Iran.

The Brent futures contract gained 2.6% to $105.24 per barrel. Murban futures closed at $102.15 on May 21 and were not trading by the time of publication of this oil price update.

"Uncertainty surrounding a US-Iran deal abounds as we head into the weekend, leaving the market susceptible to seesaw price moves if any fresh noise emerges," ING analysts said.

On the nuclear front, Washington continues to demand the complete physical transfer of Tehran's highly enriched uranium stockpile out of the country-a condition that directly conflicts with recent hardening statements from Iran's leadership.

Compounding the geopolitical friction is a highly disputed Iranian proposal to establish a formal tolling and transit fee system through the strategic Strait of Hormuz.

Speaking at an Environmental Protection Agency event at the White House on Thursday, US president Donald Trump rejected any permanent maritime taxing system, reiterating that the US treats the chokepoint as a completely free international waterway.

"Uncertainty over a potential deal is reflected in oil prices, with the market being whipsawed by headlines," ING noted.

Market analysts warn that establishing a formal state-run tolling framework in the Gulf would set a highly destabilizing precedent for global freedom of navigation.

Beneath the ongoing geopolitical positioning, physical underlying supply balances are tightening severely.

The global oil market could enter a "red zone" in July or August as peak summer demand collides with disrupted Middle East exports and rapidly depleting inventories, the executive director of the International Energy Agency said on Thursday.

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US Oil Update: Crude Settles Lower on Uncertainty Over US-Iran Deal

Crude oil prices settled lower in after-hours trading on Thursday as uncertainty over prospects for resolving the Middle East conflict weighed on the market, even as expectations that potential progress could ease geopolitical risks and reduce fears of supply disruption.Front-month West Texas Intermediate crude futures eased by 0.26% to $98.00 per barrel, while Brent futures were down by 0.20% to $104.81/bbl.Earlier in the session, prices had surged on reports that Supreme Leader Ayatollah Mojtaba Khamenei had issued a directive ordering Iran's enriched uranium to remain in the country, denting hopes for a swift resolution to the conflict.On Thursday, President Trump said the US will eventually recover Iran's stockpile of enriched uranium, a key reason for the US-Israeli alliance's conflict against Tehran."We will get it. We don't need it. We don't want it. We'll probably destroy it after we get it, but we're not going to let them have it," Trump told reporters at the White House on Thursday.Iran is in the process of responding to a text submitted by the US, which "has narrowed the gaps to some extent," local media reported on Thursday, without saying where it got the information.Iranian authorities said the latest proposal from the US partly bridged the gap between the two sides, but the Supreme Leader's remarks about keeping the country's uranium and a dispute over tolls in the Strait of Hormuz clouded the outlook.Iran is in discussions with Oman to establish a permanent toll system to formalize its control over maritime traffic through the Hormuz, according to media reports. Earlier this week, Tehran unveiled a new body, the Persian Gulf Strait Affairs Authority, to oversee activities related to the strategic waterway.US Secretary of State Marco Rubio said that a toll system would make a deal with the US "unfeasible.""We've always said a tolling system in the Strait would be unacceptable. But, we don't say that, the world says that...it would be unacceptable," Rubio said. Five Gulf Arab countries reportedly rejected Iran's establishment of the PGSA to control transit through the Hormuz earlier this week.Bahrain, Kuwait, Qatar, Saudi Arabia, and the UAE, in a letter to the UN's International Maritime Organization on Monday, reportedly said commercial and merchant vessels shouldn't engage with the PGSA or cross the waterway using a route designated by Iran.Meanwhile, the International Energy Agency said on Thursday that global oil markets could soon enter a "red zone" as global stocks deplete and as demand picks up during the summer travel season.IEA executive director Fatih Birol said the single most important solution to the Iran war energy shock is a full and unconditional reopening of the Strait of Hormuz.Speaking at Chatham House, Birol said if the Hormuz is reopened and no new oil is coming online from the Middle East, an ongoing drawdown in global stockpiles combined with demand during the summer travel season means oil markets "may be entering the red zone in July or August.

Oil & Energy

IEA Warns of Potential 'Red Zone' for Global Oil Markets This Summer

The global oil market could enter a "red zone" in July or August as peak summer demand collides with disrupted Middle East exports and rapidly depleting inventories, the executive director of the International Energy Agency said on Thursday.Speaking at Chatham House, Fatih Birol said that the scale of current oil and gas losses far exceeds previous global shocks, including the 1973 and 1979 oil crises and the 2022 European gas crunch following Russia's invasion of Ukraine.Birol said the conditions may deteriorate further if supply disruptions persist, warning that the balance between supply and demand is tightening despite coordinated emergency measures.He said global oil supply losses had reached around 14 million barrels per day, compared with about 10 million barrels per day during the combined earlier oil shocks, while gas disruptions had exceeded 130 billion cubic metres compared to 75 Bcm in Europe's recent crisis."This crisis is bigger, I would say much bigger, than all three crises in history put together," Birol said, adding that the closure of the Strait of Hormuz had also affected flows of fertilizers, petrochemicals, helium and sulfur, with wider implications for food and industrial supply chains.Birol said the Hormuz remained the central vulnerability in the global energy system, arguing that only the "full and unconditional opening" of the strategic waterway could resolve the supply imbalance.He warned that despite emergency stock releases and commercial inventories providing a buffer, those measures were being depleted. The IEA released 400 million barrels of oil from emergency stocks on March 11, which initially helped push prices down by about $20 per barrel, he said.Though about 2.5 to 3 million b/d of previously released stock is still entering the market, Birol said that "stocks are eroding" while demand rises seasonally."This may be difficult, and we may be entering the red zone in July or August if we don't see that there are some improvements in the situation. This is how I see it," he said, pointing to the start of the peak summer travel season as a key demand driver.He added that consumption was already declining in some regions due to high prices and rationing measures, particularly in parts of Asia most exposed to Hormuz-linked supply routes.Birol said developing economies in Asia and Africa were bearing the heaviest burden of the crisis, particularly India, Pakistan and Bangladesh, where liquefied petroleum gas imports for cooking had been disrupted.These countries are at the forefront of the problem, Birol said, noting that governments were introducing rationing and demand-reduction measures.On oil market structure, Birol said countries would prioritize supply reliability over price alone when choosing energy partners, adding that "trust and security risk premiums" were becoming a key factor in global trade decisions.He also said the Middle East would need to rebuild its reputation as a reliable energy export hub by diversifying supply routes, including pipelines designed to bypass chokepoints such as Hormuz.Birol said emergency stockpiles still provided "significant firepower," with about 80% of the IEA's collective stocks still available for release if needed, but stressed that such measures could not solve structural supply constraints.Looking ahead, Birol said energy prices are likely to increase. "What I'm afraid [of] is the following: the international energy prices, as a result of this, they are going to increase. And they are increasing. And this will affect the domestic prices in the petrol stations, in heating, and so on," he said.He attributed the cause to "international tension," as opposed to governments. "However there may be some extreme groups - political groups - who can abuse this as a failure of the existing political system in their countries," he said.

Oil & Energy

US Seen Leaning on Iran Oil Blockade as Strike Delays Mount, Kpler Says

Washington's strategy toward Iran is increasingly centered on economic pressure rather than direct military escalation, as a tightening maritime blockade sharply reduces Tehran's oil exports and revenue, Kpler analyst Homayoun Falakshahi said in a Thursday note.US President Donald Trump, on 18 May, again delayed a potential resumption of strikes on Iran, reportedly after requests from Qatar, Saudi Arabia, and the UAE. Gulf officials later denied knowledge of any imminent operation, raising further doubts about repeated US strike warnings.Since mid-April, the conflict has evolved into a low-intensity economic war focused on the Strait of Hormuz. Since April 13, no tanker carrying Iranian crude has crossed the blockade line between the Gulf of Oman and the Arabian Sea.The impact on Iran's export system is intensifying. Iranian crude loadings averaged 2.1 million barrels per day in the two weeks before the blockade but have since fallen to 640,000 b/d.Part of the decline may be linked to the oil spill reported near Kharg Island earlier this month, while the reactivation of retired tankers has raised concerns over the condition of Iran's storage and export infrastructure.Inventories are rising rapidly. Iranian crude on water inside the Persian Gulf has increased from 23 million barrels to 42 million barrels since the blockade began.Onshore inventories have also risen by roughly 15 million barrels, mainly at Kharg Island and Goreh, where key storage and pumping facilities are located.Meanwhile, Iranian crude stored outside the blockade zone has dropped from 122 million barrels to 89 million barrels over the past month, reducing barrels available to Chinese buyers.Chinese teapot refiners are also drawing down inventories amid weak refining margins. In addition, OFAC recently sanctioned 19 more ships linked to the Iranian oil trade, including four VLCCs, complicating future deliveries into China.If the blockade holds, analysts estimate Iran's effective oil export revenues could approach zero within 60-70 days, potentially making the blockade more damaging than intermittent military strikes, Kpler said.