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EMEA Oil Update: Crude Falls as US-Iran Peace Hopes Grow After Israel-Lebanon Truce

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EMEA crude futures fell in after-hours trading on Thursday as the market assessed the potential easing of Middle East tensions following a ceasefire between Israel and Lebanon, despite reports of continued clashes in southern Lebanon.

Brent crude futures fell 2.8% to $95.09 per barrel, while Murban crude declined 3.7% to $93.60/bbl.

"We've been here before with ceasefire deals and whether Hezbollah is going to join such a deal remains questionable," said Derek Halpenny, head of research at MUFG.

On Wednesday, Israel and Lebanon said they had agreed to a ceasefire, raising hopes for a broader deal between the US and Iran. Tehran has indicated that any wider agreement with Washington would partly depend on an end to hostilities between Israel and the Iran-backed Hezbollah movement.

The ceasefire announcement prompted cautious optimism that easing cross-border conflict could open the door to renewed US-Iran talks. However, Hezbollah rejected a new ceasefire in Lebanon on Thursday, and Israel said it would not withdraw its troops from the country.

Iran's Islamic Revolutionary Guard Corps reportedly said peace in the region would not be possible unless Israel withdrew from the occupied areas in Lebanon.

IRGC said in a statement that the main condition for accepting a ceasefire in the regional war has been a ceasefire on all fronts, including Lebanon.

Iranian Foreign Minister Abbas Araqchi said on Wednesday that Tehran's contacts with Washington had not been cut off, but that negotiations had made no progress. He added that both sides were reviewing the exchanged texts.

Strategists at Saxo Bank said the broader regional conflict remains unresolved and risks to energy supplies continue.

Meanwhile, the Strait of Hormuz remains the oil market's central focus, with supply disruptions and continued closures pushing energy prices to record highs.

On Wednesday, President Trump reportedly said that the Strait would reopen "immediately" if Iran signed a memorandum of understanding to halt hostilities, adding that some parts of the strategic waterway would first need to be cleared of mines.

Every day that passes without a resumption of oil flows leaves the market increasingly vulnerable, ING strategists said, adding that this increases the pressure to strike a deal.

On the supply front, US crude stockpiles decreased by 8 million barrels to 433.7 mmbbls in the week ended May 29, the Energy Information Administration said in its weekly report on Wednesday.

US Strategic Petroleum Reserve inventories fell to 357.1 mmbbls, down from 365.1 mmbbls a week ago, marking a weekly decline of 8 mmbbls.

ING said that inventories are likely to continue to tighten into Q3, leaving upside risk to prices.

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EMEA Natural Gas Update: Futures Edge Lower Amid Conflicting Signals on US-Iran Talks

European natural gas futures slipped slightly in after-hours trade Thursday as progress stalled on resolving Middle East conflicts, easing back after a almost 4% gain in the prior session driven by renewed Middle East tensions earlier in the week.The Dutch TTF front-month contract edged down by 0.233% to 48.75 euros ($56.68) per megawatt-hour, while the UK NBP front-month contract lost 0.399% to 118.37 British pence ($1.59) per therm.While US President Donald Trump reportedly said negotiations were going well, Iranian state media cited Iranian officials saying there was no progress. The ceasefire appeared on the verge of collapsing earlier this week after Iranian media reported that Tehran had cut off talks with the US due to Israel's military campaign in Lebanon.However, the Wall Street Journal on Wednesday reported that US President Donald Trump privately told advisers he would consider ending the ceasefire with Iran if Tehran kills US troops.Trump reportedly appeared reluctant to restart the war and may tolerate limited flare-ups for weeks or months to avoid a broader Middle East conflict."The continued lack of progress toward ending the conflict is increasing the risk that flows from the Persian Gulf could remain disrupted for an extended period. This has fueled concerns that Europe could struggle to rebuild gas inventories ahead of winter," Trading Economics said.Gas Infrastructure Europe said EU inventories stood at just over 41% of capacity, compared with around 50% at this time last year.Europe could face a significant natural gas supply squeeze and be forced to pay sharply higher prices for LNG if the Strait of Hormuz remains closed through the summer, Oxford Institute for Energy Studies strategists said in a note on Wednesday.The OIES pegged spot prices above $20/MMBtu in Europe and Asia may be needed to curb demand and rebalance global flows.It said Europe needs about 70 Bcm of LNG imports to reach roughly 80% storage by Nov. 1, in line with 2025 levels, but explains that storage might instead reach about 70% due to lost Middle Eastern supply and stronger Asian competition. Reaching even 70% would require non-European LNG demand to fall by about 13 Bcm over the summer, or 2.2 Bcm per month and preliminary May data show little evidence of such demand destruction.ANZ analyst Daniel Hynes said in a note on Thursday that North Asia LNG prices are pushing towards $19/MMBtu as shortages are already emerging. LNG stockpiles held by Japanese utilities fell to 1.91 metric tons, down 2% from a week earlier and sit at the lowest level since February.

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UAE Unlikely to Flood Oil Markets Despite OPEC Exit, Kpler Says

The UAE may have quit the Organization of Petroleum Exporting Countries to free itself from output limitations, but the Gulf producer is likely to adopt a disciplined approach to increase its exports rather than flooding the markets in the event normal energy flows through the Strait of Hormuz resumes, according to trade intelligence firm Kpler.Any increase in flows from the UAE is likely to happen gradually, with several officials from the country maintaining that it will continue to have coordination and communication with other producer states despite not being part of the group anymore, said Amena Bakr, head of Middle East & Opec+ at Kpler, in an interview with."Do I expect the UAE to suddenly open the taps and flood the market? Let's say Hormuz opens tomorrow? No, I don't expect them to do that. Because that would kind of start a price war and increase the tension between the UAE and Saudi Arabia and the other neighbors," Bakr said."So, any increase will happen in a gradual process. And it will be also communicated, so don't expect a big jump in their exports if and when Hormuz opens," she said.The UAE in late-April decided to quit OPEC, after a nearly six-decade long association, in a development that shocked energy markets, citing long-term strategic and economic priorities and future energy plans.Previous disputes due to UAE's dissatisfaction with its quota allocations had led to a revision of its baseline a few years earlier. But it surprised markets with its decision to exit the group as it wanted to increase its capacity to 5 million barrels per day, expected to be delivered by 2027 or even as early as end of this year, Bakr said.The UAE is using the 1.8 mmbbl/d capacity Fujairah pipeline for its exports, while also constructing a second alternative pipeline to bypass the strait. The new pipeline is about 50% complete and is projected to be ready in 2027, helping the Gulf producer to double its capacity to export shipments without relying on the Strait."So the way they frame it is that it no longer makes economic sense for the UAE to be part of the OPEC, OPEC+ organizations because we are at a point now where the market needs more supply, and they want to have this flexibility after the resumption of Hormuz flows to increase that supply to the market without any constraints," Bakr said.According to Bakr, the ongoing energy supply crisis due to the Middle East conflict and the effective closure of the Strait of Hormuz, which handles almost one-fifth of global oil and gas flows, has removed any uncertainty from the market that UAE's departure from OPEC could have otherwise had. However, the exit of the group's third largest member will rob OPEC of its spare capacity."Spare capacity is firing power when it comes to managing the market. It's the kind of checks and balances, and it's really important for any group to hold spare capacity. And with the UAE exiting, you have 30% of spare capacity that was taken out," Bakr said."Is this [going to] cause a collapse of the entire system, of a collapse of OPEC? So, I think OPEC is still going to continue. It's going to evolve. Maybe they'll add more members in the future, it's going to, you know, take on a different form. The idea of market management, I think, is still significant and will be maintained."While UAE's exit could encourage other member nations to consider a similar strategy, the energy supply crisis is likely to help OPEC maintain cohesion within the group as it doesn't have to deal with the contentious issue of production cuts for the time being, Bakr said."You get tension when you impose cuts. And we're in a completely opposite situation now. We're in a situation where the market needs more supply," she added.In case of a normalcy in situation, which includes the complete unwinding of the voluntary cuts and a resumption of regular flows through Hormuz Strait, the OPEC could consider a fair distribution of UAE's quota among other members, Bakr added.

Oil & Energy

US Oil Update: Crude Prices Slump on Israel-Lebanon Truce

Global crude benchmarks retreated sharply on Thursday as escalating hopes for a diplomatic breakthrough in the Middle East prompted traders to unwind geopolitical risk premiums.Front-month West Texas Intermediate crude futures dipped 3.9% to $92.29 per barrel, while Brent futures fell 3% to $94.80/bbl.The sudden selloff reversed recent upward momentum, driven by a cooling of immediate geopolitical panic late Wednesday after Israel and Lebanon finalized a conditional ceasefire framework.This diplomatic breakthrough has raised cautious optimism that Washington and Tehran might broker a broader backchannel agreement, particularly since Iran had previously conditioned any maritime de-escalation in the Persian Gulf on a total cessation of hostilities along the Lebanese front."However, the broader regional conflict remains unresolved and risks to energy supplies persist," Saxo Bank analysts said.Analysts said flow through the Strait of Hormuz has edged up. "Traffic through the Strait of Hormuz, a vital waterway that normally handles around one-fifth of global oil and LNG shipments, has recovered modestly but remains well below pre-conflict levels, continuing to support a significant geopolitical risk premium across energy markets," they added.As the Middle East conflict enters its fourth month, the Western hemisphere's buffer against sudden supply disruptions is rapidly drying up under the weight of robust international export demand and domestic refining runs.In its official weekly report released on Wednesday, the US Energy Information Administration confirmed that domestic commercial crude inventories plummeted by a massive 8 million barrels for the week ended May 29, dragging total stockpiles down to 433.7 million barrels.Market experts warn that until Middle Eastern oil flows normalize fully, global balances remain acutely exposed to sudden, violent price spikes as commercial stockpiles continue to thin."If the Strait stays closed beyond June, our framework implies that each additional month of disruption would lift average prices by roughly $5 in 3Q26 and $15 in 4Q26," J.P. Morgan noted.