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US Oil Update: Futures Settle Higher on Slow Progress in US-Iran Peace Talks

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Crude oil prices settled higher in after-hours trading on Friday as markets weighed the prospect of a breakthrough in US-Iran peace negotiations against the prolonged closure of the Strait of Hormuz.

Front-month West Texas Intermediate crude futures rose by 0.67% to $97 per barrel, while Brent futures climbed 1.35% to $103.96/bbl.

The US and Iran have signaled progress in talks to end the war, but the two sides remain at loggerheads over Tehran's enriched uranium stockpile and tolls on vessels transiting the Strait of Hormuz.

"While there are signs of optimism, uncertainty reigns. This is not the first time a deal seemed close, only for negotiations to break down," ING strategists said in a note Friday.

US Secretary of State Marco Rubio told reporters in Sweden, while attending a Nato summit, that there had been "slight progress" in the latest round of talks aimed at preventing a wider regional conflict.

"We are doing everything we can to achieve the global consensus necessary to prevent Iran from creating a tolling system, and we're trying to use the United Nations," Rubio told reporters at the Nato summit.

Though Iran said the latest proposal from the US partly bridged the gap between the two sides, comments from Supreme Leader Ayatollah Mojtaba Khamenei about keeping Tehran's uranium stockpile and a dispute over tolls in the Strait clouded the outlook for a breakthrough.

Pakistan's army chief, Asim Munir, arrived in Tehran on Friday, where he is expected to meet key Iranian figures to discuss Iran-US peace talks and regional peace and stability.

Separately, a Qatari negotiating team arrived in Tehran on Friday in coordination with the US to help secure a deal, according to media reports.

Soojin Kim, research analyst at MUFG, said the prolonged disruption in Hormuz has driven a sharp drawdown in global crude and fuel inventories, while the International Energy Agency reiterated its readiness to release additional emergency stockpiles if supply pressures intensify further.

On the operational side, the number of rigs drilling in the US rose by seven to 558 in the week ending May 22, Baker Hughes (BKR) said on Friday, amid a resurgence in domestic activity as the Middle East conflict drives up energy prices.

The US oil rig count rose by 10 from 415 the previous week to 425, while the number of gas rigs dropped by three from 128 the previous week to 125.

Meanwhile, US consumers continue to feel the impact of energy inflation, as gasoline prices have climbed to their highest level for the Memorial Day holiday since 2022, the Energy Information Administration said on Friday.

The EIA said the national average price for regular gasoline reached $4.49 per gallon on May 18, up 42% from a year earlier and marking the highest level for the Monday before Memorial Day weekend since Russia's invasion of Ukraine disrupted oil markets three years ago.

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