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Weekly Oil Update: Middle East Friction, US Stockpile Drop Boost Prices

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Crude oil benchmarks reverse a two-week decline to finish higher this week as traders price in a fresh geopolitical premium, while ongoing US-Iran peace talks face structural friction, keeping global supply tightness firmly in place.

West Texas Intermediate settled at $90.25 per barrel, up from $87.76/bbl the previous week, while Brent closed at $93.03/bbl, down from $91.99/bbl a week earlier.

Brent futures were seen gaining more than 3% week-over-week while WTI benchmarks added over 6% so far on a weekly basis.

The week began with a sudden price surge following heavy weekend military exchanges, where US Central Command executed targeted self-defense airstrikes against Iranian radar and drone facilities on Qeshm Island and Goruk.

The lack of a definitive breakthrough between the US and Iran has left traders cautious about aggressively pricing in any immediate return of supply via the Strait of Hormuz.

Compounding the geopolitical tension, underlying market fundamentals provide strong structural support to the price rally.

The US Energy Information Administration confirms in its weekly report that domestic commercial crude inventories plummeted by a massive 8 million barrels for the week ended May 29, dragging total stockpiles down to 433.7 million barrels.

On the demand side, the Organization of the Petroleum Exporting Countries expects oil demand growth to remain "robust" despite the ongoing geopolitical tensions in the Middle East, and will maintain its estimate of 1.2 million barrels per day for this year, Reuters reported Thursday, citing Secretary General Haitham Al Ghais.

"Looking ahead, our base case continues to assume that the Strait of Hormuz reopens in June. Under that assumption, Brent should average around $100 through the balance of the year, slipping below triple digits on a monthly average basis only in December," J.P. Morgan noted.

"The alternative remains far less comfortable. If the Strait stays closed beyond June, our framework implies that each additional month of disruption would lift average prices by roughly $5 in 3Q26 and $15 in 4Q26, driven primarily by accelerating inventory depletion," they added.

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