Oil prices are heading lower on Friday as traders react to signs of easing tensions between the United States and Iran.
At the latest check, West Texas Intermediate crude oil is down 1.1% to US$86.80 a barrel. Brent crude is also down 1.14% to US$89.35 a barrel.
Both benchmarks are now trading near their lowest levels in almost 2 months after spending much of the past 3 months above their pre-war levels.
So, what is putting pressure on oil prices today?
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Progress with Iran
The latest fall came after US President Donald Trump cancelled planned military strikes on Iran and said a peace agreement could be reached as early as this weekend.
The announcement reduced concerns that the conflict could immediately escalate and cause further damage to Iran's oil facilities.
However, there is still no confirmed agreement.
Iran's semi-official Fars news agency said Tehran was likely to accept a deal, but no final text had been approved. The proposed agreement would reportedly include reopening shipping through the Strait of Hormuz and restrictions on Iran's nuclear program.
The Strait remains a major risk for the oil market. Iran has threatened vessels attempting to pass through the waterway, although commercial ships have continued to make the journey.
Brent crude has now fallen around 15% over the past month, while WTI is down about 14%.
China is buying much less oil
China's lower oil imports are also helping keep prices below US$100 a barrel.
The Asian giant imported about 7.8 million barrels of crude oil per day in May. That was 29% lower than a year earlier and the weakest monthly result in more than 8 years.
Before the Iran conflict, China was importing close to 11 million barrels per day. That means around 3 million barrels of daily demand has dropped out of the market.
Chinese refiners have been drawing down existing stockpiles instead of buying more oil at higher prices.
Fuel demand has also weakened. Petrol sales at Sinopec fell 8% in April, while diesel sales dropped 6%.
The uptake of electric vehicles and weaker refinery activity have both reduced China's need for imported crude.
US exports have helped fill the gap
Higher US oil exports have added more supply to the market.
Crude exports climbed above 5 million barrels per day during April and May, compared with an average of about 4 million barrels per day in recent years.
Those additional barrels have helped make up for some of the supply disruption caused by restricted shipping through the Strait of Hormuz.
What happens next?
Oil prices will continue to move with news from the United States and Iran.
A confirmed deal that allows ships to move freely through the Strait of Hormuz would ease concerns about oil supply.
However, global oil stockpiles are still falling. The International Energy Agency (IEA) expects demand to remain higher than supply until the final quarter of 2026.
Until there's more certainty, oil prices could keep seesawing in the short term.
