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

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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.

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