Oil rebounds on uncertainty over Iran peace deal and inventory drawdowns
- By Reuters -
- May 21, 2026
Oil prices rebounded on Thursday after two days of losses on outstanding supply concerns because of the uncertain outlook for an end to the Iran war and a U.S. inventory draw raised worries about the depletion of global stockpiles.
Brent crude futures rose 81 cents, or 0.77%, to $105.83 a barrel by 0055 GMT, and U.S. West Texas Intermediate futures were up 97 cents, or 0.99%, at $99.23.
Both benchmarks dropped more than 5.6% on Wednesday after U.S. President Donald Trump said negotiations with Iran were in the final stages, but he also threatened further attacks if it did not agree to a peace deal.
Iran warned against further attacks and announced steps entrenching its control of the crucial Strait of Hormuz waterway, which before the war carried oil and liquefied natural gas shipments equal to about 20% of global consumption but has been mostly closed.
“The sharp drop in oil prices appears to be pricing in the possibility of a breakthrough in the talks,” said Yang An, analyst at Haitong Futures.
“However, if Trump insists on making no concessions to Iran, an agreement seems unlikely, and the final outcome of the negotiations could reverse sharply,” Yang said.
On Wednesday, Iran announced a new “Persian Gulf Strait Authority,” saying there would be a “controlled maritime zone” in the Strait of Hormuz.
Iran effectively closed the strait in retaliation to U.S. and Israel attacks that started the war on February 28. Most of the fighting has stopped since an April ceasefire but while Iran is limiting traffic through Hormuz, the U.S. has blockaded its coastline.
Trump says negotiations with Iran in final stages, warns of attacks if deal fails
The supply losses from the key Middle Eastern region because of the war have forced countries to pull from their commercial and strategic inventories at a rapid rate, raising concerns about draining them.
The U.S. Energy Information Administration said on Wednesday the country withdrew nearly 10 million barrels of oil from its Strategic Petroleum Reserve last week, the biggest drawdown on record.
The EIA also said commercial crude inventories fell by 7.9 million barrels to 445 million barrels last week, compared with analysts’ expectations in a Reuters poll for a 2.9 million-barrel draw.
This is Inside ETFs, and we’re talking about options strategies.
Gasoline inventories fell by 1.5 million barrels, while distillates rose by 372,000 barrels.
“The drawdown in oil inventories will make it difficult for oil prices to remain low,” said Mingyu Gao, chief researcher for energy and chemicals at China Futures.
“With the Strait of Hormuz blocked, global refined-product and onshore crude inventories are expected to fall below their lowest levels for this time of year in the past five years by late May and late June,” Gao said.