The Oil Market Responds to Peace Talks Developments

Recap: The oil market ended the session higher on Friday as the market weighed the prospects of a breakthrough in U.S.-Iran peace talks. The market remained supported in overnight trading as traders doubted there would be any progress in peace talks as the U.S. and Iran maintained their opposing stances on Iran’s uranium stockpile and controls on the Strait of Hormuz. The crude market posted a high of $99.43 in overnight trading as a senior Iranian source stated that while the gaps with the U.S. had narrowed, there were still some sticking points in the negotiations. However, the market erased its gains and sold off to a low of $94.73 in afternoon trading as a Qatari negotiating team arrived in Tehran on Friday in coordination with the U.S. to try to help secure a deal to end the war with Iran. Also, the Pakistani military said its military chief arrived in Iran as part of the ongoing mediation efforts between the U.S. and Iran. The market later bounced off its low and settled in a sideways trading range during the remainder of the session. The July WTI contract settled up 25 cents at $96.60 and the July Brent contract settled up 96 cents at $103.54. The product markets ended the session in positive territory, with the heating oil market settling up 5.62 cents at $3.8878 and the RB market settling up 7.43 cents at $3.4539.

Technical Analysis: The crude market will look to the headlines over the long Memorial Day weekend for further direction amid the mediation efforts underway in Tehran by a Qatari team and Pakistan’s military chief to end the war with Iran. The market will await news on whether there was some breakthrough in talks in regards to Iran’s uranium stockpile and controls on the Strait of Hormuz. The oil market is seen finding support at $94.73, $94.68, $94.43, $92.84 followed by $90.25, $86.76 and $86.13. Meanwhile, resistance is seen at $99.43, $102.66, $104.45, $104.86, $105.21, $109.24, $109.47, $110.93, $117.63 and $119.48.

Fundamental News: Barclays is maintaining its 2026 average Brent crude oil price forecast at $100/barrel though risks are skewing higher. The bank said inventory trends are signaling a 6-8 million bpd deficit with the U.S. inventories within reach of the lowest levels since 2020. Barclays said that even if the Strait of Hormuz were to fully reopen today, the starting point for inventories even in the most optimistic scenario will be roughly 20 million barrels below the tightest level in recent history. Meanwhile, demand remains largely resilient and any weakness in the end uses linked to industrial activity will likely recover strongly if supply normalizes quickly.

Baker Hughes reported that U.S. energy firms this week added oil and natural gas rigs for the fifth consecutive week for the first time since February 2025. The oil and gas rig count increased by seven to 558 in the week ending May 22^nd, its highest level since June 2025. Baker Hughes said oil rigs increased by 10 to 425 this week, their highest level since July 2025, while gas rigs fell by three to 125, their lowest level since mid-April, and other miscellaneous rigs held steady at eight.

IIR Energy said U.S. oil refiners are expected to shut in about 139,000 bpd of capacity in the week ending May 22^nd, increasing available refining capacity by 516,000 bpd from the previous week. Offline capacity is expected to fall to 99,000 bpd in the week ending May 29^th.

An oil pipeline operated by Plains All American in East Los Angeles, California, was shut down after a rupture. The line was struck by a third party conducting excavation work. It did not provide details on how much oil may have leaked or a timeline on when flows would be restored. The ruptured pipeline was Line 63, which gathers and distributes crude oil from the San Joaquin Valley for delivery to another pipeline and local refiners. The fire department said a coordinated clean-up effort was underway and that there were no injuries due to the incident.

Early Market Call – as of 8:20 AM EDT

WTI – July $92.45, down $4.54

RBOB – June $3.3167, down 14.59 cents

HO – June $3.7986, down 12.38 cents

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