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US Oil Update: Crude Falls as Markets Weigh Demand Destruction, Iran Peace Deal

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Crude oil futures edged lower in midday trading on Friday as investors weighed signs of weakening global demand against the diminishing prospects for a swift breakthrough in peace negotiations between the US and Iran.

Front-month West Texas Intermediate crude futures fell 3.17% to $90.10 per barrel, while Brent futures retreated by 2.23% to $92.91/bbl.

Soojin Kim, a research analyst at MUFG, said that Trump said talks with Iran were progressing well and that efforts to end the conflict were in their final stages, though no breakthrough has yet been announced.

US crude oil inventories 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. Crude inventories are now about 3% below the five-year average for this time of year, the EIA said.

The decline exceeds Macquarie's forecast of a 6.2-mmbbl draw for the week ending May 29.

ING strategists said that, aligned with the inventory-tightening narrative, Singapore oil product stocks dropped by a significant 6.14 million barrels over the last week.

The US and Iran remain at loggerheads over a potential peace deal, with the Middle East conflict nearing the 100-day mark and Tehran claiming sovereignty over the Strait of Hormuz alongside Oman.

Iran's navy said on Friday that it had fired warning missiles and drones at US warships in the Gulf of Oman, accusing the US Navy of harassing maritime traffic and seizing commercial vessels and oil tankers, according to local media.

On Thursday, President Trump said that talks with Iran were going well, despite Tehran-backed Hezbollah rejecting a US-brokered ceasefire deal between Israel and Lebanon. Iran has indicated that any wider agreement with Washington would partly depend on an end to hostilities between Israel and the Iran-backed Hezbollah movement.

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

Kim said despite recent gains, crude prices remain well below levels seen before the April ceasefire, reflecting continued uncertainty over the pace of any lasting regional resolution.

Meanwhile, the US on Friday sanctioned a network of individuals, companies, and vessels it accused of facilitating the shipment of hundreds of millions of dollars' worth of Iranian liquefied petroleum gas, disguised as Omani-origin cargo, to buyers in South and East Asia.

The Treasury Department said the latest action is part of a broader "maximum pressure" campaign to restrict Iran's ability to generate and repatriate revenue from oil and petrochemical exports, as well as from emerging channels such as cryptocurrency.

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