Oil prices have rebounded about $1 on Thursday after sharp losses, with Brent crude futures up 88 cents, or 0.9%, at $102.15 a barrel and West Texas Intermediate gaining $1.12, or 1.2%, to $96.20 a barrel by 0032 GMT, according to The Economic Times. Both benchmarks had slumped more than 7% on Wednesday, hitting two-week lows on optimism over a possible end to the Middle East war, before paring losses after Trump said it was 'too soon' for face-to-face talks with Tehran. In domestic markets, crude oil futures had plunged over 11% to ₹8,588 per barrel on the Multi Commodity Exchange (MCX), with the May delivery contract falling ₹1,110, or 11.45%, to ₹8,588 per barrel in a business turnover of 12,132 lots. The June contract also nosedived ₹1,098, or 11.69%, to ₹8,298 per barrel in 4,274 lots.
The latest developments come after Trump suspended a short-lived mission to offer safe passage for ships through Hormuz and presented a one-page memorandum of understanding that will potentially lead to the gradual reopening of the Strait of Hormuz, according to Bloomberg. Iran is expected to respond in coming days to this latest US proposal, with an Iranian foreign ministry spokesperson cited by Iran's ISNA news agency saying Tehran would convey its response. A Pakistan mediation source and another person briefed on the talks said an agreement was close on the one-page memorandum that would formally end the conflict, as reported by The Economic Times. U.S. media outlet Axios reported that the U.S. expects Iranian responses on several key points in the next 48 hours, citing sources saying this is the closest the parties had come to an agreement since the war began.
The American president faces mounting pressure to bring the war to a close as US retail energy prices surge, fanning voters' concerns about affordability. Trump and Chinese President Xi Jinping are due to hold a summit in Beijing on May 14-15, with China's top diplomat calling for the swift reopening of Hormuz in a meeting with his Iranian counterpart this week. The US President stated there had been progress toward a broader agreement with Iran, stating that the decision was based on the request of Pakistan and other Countries, the tremendous Military Success that we have had during the Campaign against the Country of Iran, and additionally, the fact that Great Progress has been made toward a Complete and Final Agreement with Representatives of Iran. However, Trump cautioned that 'If they don't agree, the bombing starts' without giving specific details. While peace negotiations are likely to continue at least until next week's U.S.-China summit, the outlook beyond that remains uncertain, said Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment.
U.S. crude and fuel inventories continued to decline last week as countries sought to offset supply disruptions caused by the Iran crisis, with crude stocks falling by 2.3 million barrels to 457.2 million barrels compared with analyst expectations in a Reuters poll for a 3.3 million-barrel draw, according to The Economic Times. Even if a peace deal is reached, oil supplies are expected to tighten further in coming weeks because it will take weeks for oil shipments to resume from the Middle East Gulf and reach refiners worldwide. Peak summer demand is also a factor that will continue to pressure supplies. The global energy markets have been upended by the war, with the vital shipping route largely closed since the end of February. At present, the chokepoint faces a double blockade, with Tehran obstructing traffic, while the US Navy prevents vessels calling at or leaving Iranian ports to squeeze the nation's oil industry.
The war has caused long-lasting damage to oil infrastructure, with NOV estimating between 500,000 and 2.5 million barrels of oil production may be permanently lost due to shutting in wells in a hurry. Middle Eastern countries have shut in more than 11 million barrels of daily oil production, with operations not simply turning back on immediately. In March, Shaikh Nawaf Al-Sabah, the CEO of Kuwait Petroleum Corporation, told a Houston energy conference that some production would likely take months to restore. The about 5 million barrels of oil from Saudi Arabia and the U.A.E. have been rerouted to other pipelines away from the Strait, but that's only a partial release valve. Gasoline prices hit a multiyear high on Wednesday of $4.54 per gallon, with analysts expecting elevated prices could last into 2027 as the industry works to restore normal operations.
