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US Oil Update: Futures Gain on Supply Risks as US Rejects Iran Proposal

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Crude oil futures rose in midday trading on Monday on mounting supply disruption fears after the US rejected Iran's 14-point proposal to end the ongoing Middle East conflict and the closure of the Strait of Hormuz.

Front-month West Texas Intermediate crude futures climbed 1.60% to $107.11 per barrel, while Brent futures gained 1.42% to $110.85 /bbl.

"Supply concerns remain elevated as flows through Hormuz stay heavily disrupted...," Soojin Kim, research analyst at MUFG, said, adding that Trump signaled that negotiations with Iran remain unresolved while warning Tehran to move quickly toward an agreement.

The US reportedly rejected Iran's 14-point peace proposal, saying the plan does not represent a meaningful improvement and falls short of requirements for any potential agreement, as President Trump is set to meet with his national security team on Tuesday.

In a social media post over the weekend, Trump said, "For Iran, the clock is ticking, and they better get moving, fast, or there won't be anything left of them."

However, Iranian officials reportedly claimed that the US had offered a temporary reprieve to oil sanctions, one of the key demands Tehran has been seeking. Iran insists that the removal of all sanctions against the country must be part of the US commitments.

"The US and Iran remained far apart on a deal to end weeks of war and reopen the crucial Strait of Hormuz, with President Trump saying the clock is ticking for Iran," Saxo Bank strategists said in a note on Monday.

On the supply front, the International Energy Agency executive director, Fatih Birol, said on Monday that commercial oil inventories were depleting rapidly, with only a few weeks' worth left due to the ongoing Middle East conflict and the closure of the Hormuz.

Birol, who is participating in the Group of Seven finance leaders meeting in Paris, told reporters that the release of strategic oil reserves had added 2.5 million barrels of oil per day to the market, but said these reserves "are not endless".

Meanwhile, Kpler said the US downstream operations are running at full capacity as refiners respond to tightening global fuel balances and surging export demand.

Refinery utilization is averaging almost 93%, supported by strong distillate and gasoline margins, lighter maintenance schedules, and rising reliance on Atlantic Basin supply, Kpler strategists said in a note.

The analysts said that US refined product exports have surged to record levels while domestic inventories have fallen by about 55 million barrels since early March, leaving product balances at five-year lows.

Though a fragile ceasefire was reached in April, tensions between Iran and the US continue, with Tehran keeping the Hormuz closed, while Washington continues to blockade Iranian ports.

The US Navy has redirected 84 Iran-linked commercial vessels and disabled four others since imposing the blockade on April 13, the US Central Command said in a social media post on Monday.

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Oil & Energy

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