Oil prices edged higher in early trade on Wednesday, clawing back some of the previous session’s losses, as investors assessed whether the Iran war will truly end and the Strait of Hormuz reopen.
Brent crude futures gained 47 cents, or 0.6%, to $79.43 a barrel, while U.S. West Texas Intermediate rose to $76.53 a barrel, up 48 cents, or 0.6%, as of 0038 GMT.
Both benchmarks fell about 5% for a second straight session on Tuesday to three-month lows on hopes a U.S.-Iran deal would allow oil flows through the Strait.
“Oil markets retreated on expectations the Strait of Hormuz would reopen following the peace agreement, but traders held off further selling pending details,” said Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, a unit of Nissan Securities.
WTI is likely to remain volatile within $10 above or below $80 a barrel, he added.
Details of the interim peace deal began to emerge on Tuesday with U.S. President Donald Trump saying it would rule out a nuclear weapon for Tehran and a U.S. official saying it would allow Iran to sell oil upon signing.
The memorandum of understanding, not yet public, extends a tenuous ceasefire announced in April by another 60 days to allow talks toward a permanent truce.
Under the deal, the United States would lift its blockade of Iran’s ports, while Tehran would oil tanker traffic through the Strait, effectively blocked since U.S. and Israel strikes on February 28.
Still, industry officials say a full return to pre-war production and refining levels is likely to take weeks, months or even years.
Israel has distanced itself from both the April ceasefire and the latest U.S.-Iran agreement, adding uncertainty to whether the new truce will hold.
Israeli drone strikes targeted three vehicles in southern Lebanon on Tuesday, killing at least four people and wounding others, Lebanon’s National News Agency (NNA) reported. Trump issued a rare public rebuke of Israel’s military tactics.
Meanwhile, China’s crude oil throughput in May fell 9.1% on the year to the lowest level in almost four years, data showed, also signalling that refiners were starting to draw on stockpiles amid the Iran war.
The American Petroleum Institute report showed U.S. crude stocks fell by 8.3 million barrels in the week ended June 12, the sources said. It exceeded expectations for a 4.6 million barrels draw, with official numbers due from the Energy Information Administration at 10:30 a.m. ET (1430 GMT) on Wednesday.
(Reporting by Yuka Obayashi; Editing by Sonali Paul)