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US Oil Update: Futures Steady Amid Xi-Trump Talks, Hormuz Risks Persist

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Crude futures largely held steady in after-hours trading on Thursday as markets weighed developments from the US-China trade summit against limited vessel transits through the Strait of Hormuz amid the ongoing Middle East conflict.

Front-month West Texas Intermediate crude futures rose by 0.99% to $102.02 per barrel, while Brent futures gained 0.87% to $106.55/bbl.

The US Energy Information Administration said in its weekly report on Wednesday that crude inventories fell by 4.3 million barrels to 452.9 million barrels in the week ended May 8. The agency said the stockpiles are now about 0.3% above the five-year average for this time of year.

"The draw is driven by continued strength in crude oil exports, which grew by 742k b/d week-on-week," ING strategists said in a note on Thursday.

On Thursday, the White House said President Trump met with Chinese President Xi Jinping, noting that the two leaders agreed the Strait of Hormuz must be open for the free flow of energy. Xi said the "rejuvenation of China" and "Make America Great Again" can go hand in hand.

Trump said President Xi had offered China's help to open the Hormuz and expressed interest in buying American oil to reduce Beijing's dependence on the strategic waterway in the future. The Xi-Trump summit was held amid the ongoing Middle East conflict that has roiled global markets.

Iran began allowing some Chinese vessels to transit through the Hormuz on Thursday following an agreement on Tehran's management protocols for the waterway. Iran's National Security and Foreign Policy Commission has reportedly finalized a comprehensive plan for the security and development of the Persian Gulf and the Strait.

Tehran reportedly allowed about 30 vessels to cross the Hormuz, though attacks on one ship and the seizure of another kept stoking concerns of supply disruptions.

Iran allowed some Chinese vessels to transit the Hormuz on Thursday following an agreement on Tehran's management protocols for the waterway. Iran's National Security and Foreign Policy Commission has reportedly finalized a comprehensive plan for the security and development of the Persian Gulf and the Strait.

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.

On Thursday, the US Central Command also said it had redirected 70 commercial vessels as part of a blockade targeting ships entering and exiting Iranian ports.

On the supply side, OPEC and the International Energy Agency published their latest updates on how the Iran war has impacted the oil market.

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, as demand is now expected to contract by 2.4 million b/d year-over-year in Q2 and 420,000 b/d for the entire year.

Market participants are closely monitoring the expiry of a US sanctions waiver that allows the purchase of Russian oil cargoes, after India reportedly asked Washington for an extension.

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Global Shale Expansion Gains Pace as US Producers Look Overseas, Wood Mackenzie Says

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