Crude futures diverged in midday trading on Thursday, paring gains from the previous session, on renewed optimism that the three-month conflict could be nearing a resolution.
Front-month West Texas Intermediate crude futures were up 0.41% to $89.01 per barrel, while Brent futures were down 0.56% to $93.76/bbl.
Futures rallied earlier Thursday after the US and Iran traded military strikes.
US crude oil stockpiles fell by 3.3 million barrels to 441.7 mmbbls in the week ended May 22, the Energy Information Administration said in its weekly report on Thursday. The decline falls below Macquarie's forecast of a 1.4-mmbbl draw for the week ending May 22.
US Strategic Petroleum Reserve inventories dropped to 365.1 mmbbls for the week ended May 22, down from 374.2 mmbbls a week ago, marking a weekly decline of 9.1 mmbbls, EIA data showed.
Crude inventories are now about 2% below the five-year average for this time of year, the EIA said.
US and Iranian negotiators have agreed to a memorandum of understanding that would extend the ceasefire for 60 days and allow "unrestricted" passage for commercial vessels through the Strait of Hormuz without paying tolls to Iran, pending Trump's final approval, according to an Axios report.
The White House confirmed the development toin an emailed response, citing US officials.
However, the agreement between the US and Iran still needs final approval from President Trump, who has told mediators he wants a few days to make the final decision.
On Thursday, Iran's Revolutionary Guard targeted a US air base in Kuwait with ballistic missiles, which the US Central Command said were successfully intercepted.
The attack came after US forces launched fresh strikes in Iran against a military site believed to threaten American troops and commercial shipping through the Hormuz.
The tentative agreement between the US and Iran could bring the two sides closer to reopening the Hormuz and help alleviate a global energy crisis that has sent fuel costs to record highs.
The International Energy Agency said in its May Oil Market Report that with Hormuz tanker traffic still restricted, cumulative supply losses from Arabian Gulf producers already exceed 1 billion barrels, with over 14 million barrels per day of oil now shut in.
Kpler strategists said negotiations between the US and Iran remain the key variable for transiting the Strait, with access likely to remain selective until a clearer framework for navigation is agreed.
On Wednesday, the US Treasury Department sanctioned Iran's Persian Gulf Strait Authority, accusing the agency of extorting commercial vessels in the strategic waterway to fund the Islamic Revolutionary Guard.
"The Iranian military's latest attempt to extort global maritime trade is proof that Economic Fury has left the regime desperate for cash," Treasury Secretary Scott Bessent said.
Secretary Bessent separately warned Oman against collaborating with Iran over a tolling mechanism.
"Oman, in particular, should know that the US Treasury will aggressively target any actors involved - directly or indirectly - in facilitating tolls for the Strait and any willing partners will be penalized," he said.