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US Oil Update: Futures Rally as Trump Leaves China Without Breakthrough

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Crude oil futures surged in midday trading on Friday after President Trump departed China without securing a breakthrough to end the blockade of the Strait of Hormuz, reigniting concerns that disruptions to global supplies will deepen.

Front-month West Texas Intermediate crude futures rose by 3.95% to $105.17 per barrel, while Brent futures gained 3.23% to $109.12/bbl.

"President Trump said he does not need Hormuz reopened, although discussions with Chinese President Xi included the ongoing conflict and energy security concerns," Soojin Kim, research analyst at MUFG, said.

On Friday, Trump reportedly said he didn't push President Xi to pressure Iran to open the Hormuz, offering no sign of a breakthrough in the standoff over the key chokepoint. China is the top buyer of Iranian crude.

The US President reportedly said that he is losing patience with Iran. "I am not going to be much more patient. They should make a deal," Trump was quoted as saying.

Chinese FM Wang Yi reportedly said Beijing believes a solution to issues in the Strait of Hormuz "lies in achieving a permanent and comprehensive ceasefire" between the US and Iran, adding that "force cannot solve problems."

Iran has "no trust" in the US and is only interested in negotiating with Washington if it is serious, Iranian Foreign Minister Abbas Araghchi said on Friday, adding that Iran is prepared to return to fighting but also to pursue diplomatic solutions.

Araghchi said "trust is the most important issue," while addressing reporters in New Delhi on Friday, adding that they "cannot trust Americans at all."

"As a result, everything has to be precise, and everything has to be clearly defined before we can reach an agreement," Araghchi reportedly said.

Liquidity Energy strategists said crude extended gains overnight on reports that little progress was made during the Trump-Xi summit toward resolving disruptions impacting Middle East energy shipments.

Meanwhile, flows through the Hormuz are easing following a ship seizure near the strategic waterway.

On Thursday, the United Kingdom Maritime Trade Operations Center says it received a report of a vessel being "taken by unauthorized personnel" near the UAE emirate of Fujairah. UKMTO said the ship was taken 38 nautical miles off the UAE in the Gulf of Oman, where it was anchored.

China is likely to support a gradual reopening of the Strait of Hormuz, but on terms that preserve its flexibility, Kpler strategists said, adding that the closure threatens global growth, Asian energy markets and the export demand underpinning China's economy.

On the supply side, the Middle East conflict has driven global oil inventories down at a record pace, and the market will remain "severely undersupplied" until October even if hostilities end next month, the International Energy Agency said on Wednesday.

The IEA said that global observed oil inventories dropped by 250 million barrels in March and April, or at a rate of about 4 million barrels per day.

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