Oil falls to its lowest level in two weeks as the US and Iran get closer to a deal
Oil prices dropped over 4% to reach two-week lows on Monday, fueled by increasing optimism that the United States and Iran were edging closer to a peace agreement, despite ongoing disagreements over critical matters like blockades on the Strait of Hormuz.
Brent crude futures declined by $4.44, or 4.3%, reaching $99.10 a barrel at 0822 GMT. Meanwhile, U.S. West Texas Intermediate futures fell to $92.24 a barrel, down $4.36, or 4.5%. Both contracts reached their lowest point since May 7, earlier in the session.
On Saturday, U.S. President Donald Trump stated that Washington and Iran had “largely negotiated” an understanding regarding a peace deal that would reopen the Strait of Hormuz, a vital route that previously facilitated a fifth of global shipments of oil and liquefied natural gas before the onset of the conflict.
However, the two sides continue to disagree on several challenging issues, with Trump stating on Sunday that he had instructed his representatives not to hasten into any agreement.
We have faced this situation before, resulting in the breakdown of discussions. “Therefore, the market will likely exercise more caution in its reactions,” stated Warren Patterson, head of commodities strategy at ING.
Both sides tempered expectations for a quick resolution on Monday, as U.S. Secretary of State Marco Rubio stated that there would either be a favorable agreement or Washington would address Iran in “another way.
On Monday, Esmaeil Baghaei, the spokesperson for Iran’s foreign ministry, stated that Iran is engaged in negotiations to conclude the war and is not presently addressing nuclear matters.
Analysts anticipate that it will take months for oil flows through the strait to return to normal as repairs are made to the damaged oil and gas facilities.
We maintain our view that the primary elements to monitor in the oil market are the physical oil flows, and to date, the flows through the Strait continue to be limited,” stated UBS analyst Giovanni Staunovo.
On Monday, two liquefied natural gas tankers were departing the Strait, bound for Pakistan and China. Meanwhile, a supertanker carrying Iraqi crude set sail for China on Saturday after being stranded for nearly three months, according to shipping data.
U.S. energy companies have reacted to rising local energy prices by increasing the number of oil and natural gas rigs for the fifth consecutive week, marking the first occurrence of this trend since February 2025.
The rig count, an early indicator of future output, increased by seven to reach 558 in the week ending May 22, marking its highest level since June 2025. Despite this, Baker Hughes reported that the total count had decreased by eight rigs, or 1%, compared to the same period last year.
