Oil slips to 2-week low as US-Iran seen moving closer to peace deal
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[SINGAPORE] Oil prices fell 6 per cent to two-week lows on Monday (May 25), on optimism that the US and Iran were moving closer towards a peace deal even though they remained at odds over key issues, including blockades on the Strait of Hormuz that continued to restrict oil supply from the Middle East.
Brent crude futures fell US$5.85, or 5.7 per cent, to US$97.69 a barrel by 0343 GMT, while US West Texas Intermediate were at US$90.85 a barrel, down US$5.75, or 6 per cent. Both contracts touched their lowest since May 7 earlier in the session.
On May 23, US President Donald Trump said that Washington and Iran had “largely negotiated” a memorandum of understanding on a peace deal that would reopen the Strait of Hormuz, which before the conflict carried one-fifth of global oil and liquefied natural gas shipments.
“Notwithstanding all the caveats and risks that remain to the peace deal and Strait of Hormuz, there is now some light at the end of the tunnel, which will bring some near-term oil price relief,” said MST Marquee analyst Saul Kavonic.
However, the two sides remain at odds on several difficult issues, with Trump saying on May 24 he had told his representatives not to rush into any deal with Iran.
“We’ve been at this stage before, only for talks to break down. Therefore, the market will likely be more cautious about overreacting,” said Warren Patterson, head of commodities strategy at ING.
Analysts expect a return to normal oil flows through the strait will take months, while damaged oil and gas facilities are repaired.
“The longer the crisis stretches, the more debatable it becomes whether world leaders genuinely want a quick end to disruptions,” said Phillip Nova analyst Priyanka Sachdeva.
US energy firms responded to higher local energy prices by adding oil and natural gas rigs for the fifth week in a row, for the first time since February 2025.
The rig count, an early indicator of future output, rose by seven to 558 in the week to May 22, its highest since June 2025. Even so, Baker Hughes said the total count was still down eight rigs, or 1 per cent below this time in 2025.
“Momentum indicators suggest markets are attempting to stabilise after last week’s aggressive sell-off, but conviction remains weak,” Sachdeva said. REUTERS
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