Oil pulls back from biggest losses as Trump says Israel, Hezbollah to stop attacks

[Data analyzing in commodities energy market: the charts and quotes on display. US WTI crude oil price analysis. Stunning price drop for the last 20 years.]
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Crude oil futures rose Monday by the most in about a month after Iran said it would break off negotiations [https://seekingalpha.com/news/4598904-crude-oil-spikes-as-iran-says-stopping-talks-with-us-will-completely-block-strait-of-hormuz] with the U.S. and move to fully close the Strait of Hormuz, purportedly as a protest against Israel's attacks in Lebanon.

Oil prices dropped from their highs after President Trump said the growing conflict between Israel and Hezbollah in Lebanon will stop, following calls he held with Israeli Prime Minister Netanyahu and Hezbollah "through highly placed representatives."

"There will be no troops going to Beirut," and the Iran-backed Hezbollah "agreed that all shooting will stop," Trump wrote on Truth Social, and then said in a follow-up post that talks were continuing "at a rapid pace" with Iranian leaders.

Netanyahu said he told Trump on their call that "if Hezbollah does not cease attacking our cities and citizens, Israel will attack terror targets in Beirut" and that the Israeli military will continue to operate as planned in southern Lebanon.

Monday's developments came after the U.S. and Iran exchanged strikes over the weekend, with the U.S. hitting radar and drone sites and Iran retaliating against targets in Kuwait.

"Geopolitical developments remain unfavorable, with negotiations aimed at securing a prolonged ceasefire still unresolved," Spartan Capital's Peter Cardillo said in a note. "Elevated geopolitical risk is likely to keep energy markets volatile, with upside risks to oil prices remaining firmly in place."

Analysts at Goldman Sachs said weak oil demand in China and ​Europe poses a major downside risk to ⁠its Q4 Brent crude forecast of $90/bbl and its WTI outlook of $83/bbl, although of course supply disruptions in the Middle East could push prices higher.

April oil sales data from China and Western Europe jointly imply ~2M bbl/day of downside risk to the bank's "already low" demand estimates for the month, adding ~$10/bbl of downside risk to its Brent crude forecast, Goldman said.

"We see significant upside price risks from potentially more persistent Mideast supply losses but also meaningful price downside from weaker demand," the bank wrote. "Actual end-use oil demand may have fallen more in response to higher prices than expected."

Front-month Nymex crude (CL1:COM [https://seekingalpha.com/symbol/CL1:COM]) for July delivery jumped 5.5% to $92.16/bbl, its biggest gain since April 29, and front-month Brent crude (CO1:COM [https://seekingalpha.com/symbol/CO1:COM]) for August delivery finished 4.2% higher at $94.98/bbl, its strongest showing since May 4.

Contracts for refined products also jumped, reversing a recent slide that had sent retail gasoline prices across the U.S. lower for 11 consecutive days, with the national average retail price starting June at $4.322/gal, more than $0.24 lower than the recent high of $4.5641/gal on May 21.

Front-month Nymex natural gas (NG1:COM [https://seekingalpha.com/symbol/NG1:COM]) for July delivery fell 3.4% to $3.179/MMBtu, snapping a three-session winning streak.

ETFs: (USO [https://seekingalpha.com/symbol/USO]), (BNO [https://seekingalpha.com/symbol/BNO]), (UCO [https://seekingalpha.com/symbol/UCO]), (SCO [https://seekingalpha.com/symbol/SCO]), (USL [https://seekingalpha.com/symbol/USL]), (DBO [https://seekingalpha.com/symbol/DBO]), (DRIP [https://seekingalpha.com/symbol/DRIP]), (GUSH [https://seekingalpha.com/symbol/GUSH]), (USOI [https://seekingalpha.com/symbol/USOI]), (UNG [https://seekingalpha.com/symbol/UNG]), (BOIL [https://seekingalpha.com/symbol/BOIL]), (KOLD [https://seekingalpha.com/symbol/KOLD]), (UNL [https://seekingalpha.com/symbol/UNL]), (FCG [https://seekingalpha.com/symbol/FCG]), (XLE [https://seekingalpha.com/symbol/XLE])

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