Brent declines as Israel-Lebanon truce opens room for further talks

The front-month ICE Brent contract has declined by $1.90/bbl on the day, to trade at $96.58/bbl at 09.00 GMT.

IMAGE: Oil storage facility. Getty Images

Upward pressure:

Brent’s price has felt some upward pressure after the US Energy Information Administration (EIA) reported a sizeable decline in US crude stocks.

Commercial US crude oil inventories decreased by about 8 million bbls to 434 million bbls in the week ending 29 May, according to data from the EIA.

“While inventories do fall seasonally as refiners ramp up operating rates, the pace of decline has been faster than usual,” two analysts from ING Bank noted.

The American Petroleum Institute (API) also reported a larger-than-expected draw of 6.8 million bbls a day earlier.

A decline in US crude stocks could indicate higher demand for oil and can put some upward pressure on Brent's price.

Downward pressure:

Hope of a lasting truce between Israel and Lebanon, following the US-brokered ceasefire agreement, has put downward pressure on Brent’s price today.

Under the agreement, both sides will immediately cease all hostilities. This could help achieve a broader deal with Iran, ultimately reopening the Strait of Hormuz, market analysts said.

“News that Israel and Lebanon agreed on a ceasefire could potentially open the door for talks to advance,” ING Bank’s analysts said.

By Aparupa Mazumder

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