EMEA crude futures climbed in after-hours trading on Thursday, reversing earlier losses, on reports that Iran's supreme leader will not allow the country's enriched uranium to be shipped abroad, as signs of tightening global crude inventories lent further support.
Brent crude futures rose by 1.55% to $105.68 per barrel, while Murban oil futures jumped 3.59% to $106.93/bbl.
Iran's Supreme Leader Ayatollah Mojtaba Khamenei has reportedly issued a directive ordering Iran's enriched uranium to remain in the country.
The directive from the Supreme Leader could further complicate negotiations and frustrate President Trump's efforts to broker a peace deal to end the ongoing conflict. The US has said dismantling Iran's nuclear program is a central objective of 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.
"Oil edged higher after a sharp selloff, as President Trump said the US was in the 'final stages' of negotiations with Iran, raising hopes for a potential reopening of the Strait of Hormuz and a gradual recovery in energy flows," said Soojin Kim, research analyst at MUFG.
Fueling bullish sentiment, 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 that if the Strait of Hormuz is reopened and no new oil comes online from the Middle East, an ongoing drawdown in global stockpiles, combined with demand during the summer travel season, means oil markets may enter the red zone in July or August.
Saxo Bank strategists cited Goldman Sachs to say that global crude and refined product inventories are currently being drawn down at a record pace this month.
US crude oil inventories dropped by 7.9 million barrels to 445 mmbbls in the week ended May 15, the Energy Information Administration said in its weekly report on Wednesday. Crude inventories are now about 2% below the five-year average for this time of year, the EIA said.
Meanwhile, the Middle East conflict, now in its 12th week, has choked traffic via the Strait, keeping global energy markets tight and driving energy prices and inflation higher.
"While a reopening of the Strait of Hormuz could initially unleash a wave of supply from vessels already loaded and waiting to depart, broader market normalization would likely take months given disrupted logistics, displaced shipping and depleted inventories," Saxo Bank strategists said.
The US military has redirected 94 Iran-linked commercial vessels and disabled four others since imposing the blockade on April 13, the US Central Command said on Thursday.
Iran's Islamic Revolution Guards said on Thursday that 31 commercial vessels, including oil tankers and container ships, safely transited the Hormuz over the past 24 hours.