Oil Rebounds as US-Iran Talks Stall, Putting Strait of Hormuz Tensions Back in Focus

Oil rebounded as uncertainty over negotiations between the US and Iran resurfaced.

Bloomberg reported on May 27 that Brent crude recovered above $96 a barrel, while West Texas Intermediate traded near $90. International oil prices turned higher again after tumbling more than 5% a day earlier.

President Donald Trump said he was "not satisfied" with the state of the talks. The White House also denied Iranian media reports that a draft agreement existed for Iran and Oman to jointly manage operations in the Strait of Hormuz.

Reuters, citing a US official, reported that the US recently launched additional airstrikes on targets inside Iran that were seen as threats to transit through the Strait of Hormuz and to US forces. The US had also struck areas near Hormuz earlier this week.

The main sticking points in the negotiations are Iran's nuclear program and control of the Strait of Hormuz. The waterway is effectively operating under restrictions as both the US and Iran maintain blockade measures.

Chris Weston, head of research at Pepperstone, said the market was betting somewhat optimistically on the odds of a deal. But the risk that both sides could still walk away from the negotiating table remains significant.

Separately, the American Petroleum Institute said US crude inventories fell by about 2.8 million barrels last week. Stockpiles at Cushing, Oklahoma, also declined.

Joe DeLaura, an energy strategist at Rabobank, said the market was too complacent. He added that refined fuel prices could surge if Chinese crude imports start rising again.