Morning Highlights: Brent at $91, Down 9% on the Week; U.S. and Iran Reportedly Reach Ceasefire Extension Agreement, Trump Yet to Approve

Friday, May 29, 2026

Brent (August) $91.34 | WTI (July) $87.71 Brent -1.36 (-1.5%), WTI -1.19 (-1.3%). Brent down roughly 9% on the week, steepest weekly decline since the week of April 6. WTI down nearly 8%, biggest weekly loss since the week of April 13. Both benchmarks have traded in up to $6 daily ranges this week on conflicting deal signals. Reuters reports U.S. and Iran reached agreement on ceasefire extension and lifting Hormuz shipping restrictions, Trump yet to approve, Iranian state media says not finalized; Japan April crude imports down 66% year on year; Saudi July OSP expected to fall further; U.S. crude, gasoline and distillate stocks all fell last week per EIA.

Bottom Line

The Reuters report that the U.S. and Iran reached agreement on a ceasefire extension and lifting Hormuz shipping restrictions is, well, an interesting development since the April ceasefire, and the two caveats attached to it are equally interesting - Trump has not yet approved it and Iranian state media said it has not been finalized. The market is selling on the headline and those caveats will determine whether this week's 9% Brent decline holds or reverses sharply early next week. The pattern throughout this conflict has been consistent: deal reports produce large moves, confirmation or denial follows, and the move partially reverses. This one has the same structure.

What is different this time is the specificity of the Reuters sourcing and the fact that both sides appear to have made enough movement to produce a draft that sources felt confident enough to describe to Reuters. That is a step further than prior near-misses. What has not changed is that the core sticking points - uranium disposition, sanctions relief, frozen assets and the legal status of Hormuz - have not been publicly resolved, and Trump's cabinet meeting comments Wednesday that the U.S. is not discussing sanctions relief remain the last on-record U.S. position on one of Iran's explicit demands.

UBS's Giovanni Staunovo framed the market's operating mode correctly: flows through Hormuz remain restricted and inventories keep falling, but market focus is entirely on the deal probability. That disconnect between the financial market pricing a resolution and the physical market still drawing inventories at record pace is the same one that has characterized the entire conflict. Japan's April crude imports falling 66% year on year is the starkest single-country import data point of the crisis and a reminder of how deep the physical damage runs - numbers like that do not normalize in weeks regardless of what gets signed.

Saudi Arabia expected to cut July Arab Light OSP to Asia by a further $3 to $8 per barrel - to a premium of $7.50 to $12.50 above Oman-Dubai - reflects the demand destruction reality. Dubai's cash premium to swaps averaging $8.90 in May against $13.92 in April and a record $60-plus in March tells the story of a physical market that went from acute crisis pricing to something approaching reluctant normalization as Chinese refinery run cuts removed the most aggressive near-term demand and U.S. export surges partially filled the supply gap. A deep OSP cut is needed to attract Chinese buyers who have been running at losses and lifting less Saudi crude in May and June.

Trans Mountain's planned capacity expansion to potentially 1.2 million bpd by 2029, accelerated open season and use of drag reduction agents to add 90,000 bpd near term is the kind of supply infrastructure response the IEA flagged this week - the crisis accelerating diversification investment that would have taken years longer in a normal market environment.

Top Developments

U.S. and Iran Reportedly Agree Ceasefire Extension and Hormuz Shipping Relief, Final Approval Pending

Reuters reported Thursday that the U.S. and Iran reached agreement on extending the ceasefire and lifting restrictions on Hormuz shipping, citing sources familiar with the discussions. Trump has not yet approved the agreement and Iranian state media said it has not been finalized. The framework is consistent with the MOU structure both sides have been negotiating -- a war-halting document that opens a subsequent negotiation window. The unresolved core issues of uranium disposition, sanctions relief, frozen assets and Hormuz legal status have not been publicly addressed. ING said a reopening would offer some immediate market relief but recovery remains uncertain given the scale of infrastructure damage and the months required for production and shipping normalization.

Japan April Crude Imports Down 66% Year on Year

Japan's April crude oil imports fell 66% compared with April 2025, the sharpest annual decline of any major importing nation reported to date and a stark quantification of how completely the Middle East supply disruption has severed normal trade flows for a country that relied on the region for approximately 95% of imports before the war. Japanese refiners have been substituting U.S. crude, Latin American grades and Sakhalin-2 supply, but at significantly higher cost and on Cape of Good Hope routing that adds roughly 55 days to delivery times. U.S. crude, gasoline and distillate stockpiles all fell last week per EIA data, with exports declining 1.16 million bpd to 4.4 million bpd.

Saudi July OSP Expected to Fall Further, Physical Market Softening

A Reuters survey of five industry sources projects Saudi Aramco's July Arab Light OSP to Asia will fall to a premium of $7.50 to $12.50 per barrel above Oman-Dubai, down $3 to $8 from June's already-reduced level. Dubai cash premiums have averaged $8.90 in May against $13.92 in April and a record $60-plus in March, reflecting the collapse in urgent Chinese buying and the partial offset from U.S. and Atlantic Basin export surges. Chinese refiners running at losses and lifting less Saudi crude in May and June are driving the OSP reduction. One survey respondent said a deep price cut is needed to attract demand at current levels. All other Saudi grades are expected to fall by a similar magnitude.

Trans Mountain Accelerates Expansion, Targets 1.2 Million bpd by 2029

Trans Mountain Corp. will hold a second open season for additional pipeline capacity and plans to add 90,000 bpd near term using drag reduction agents, ahead of the original schedule, CEO Mark Maki said. A first open season launched in April is expected to bring long-term contracted capacity to 90% from 80%. A larger Mainline Optimization Project targeting an additional 210,000 bpd has been pulled forward to end-2028 from 2030-2031. Total pipeline capacity could reach 1.2 million bpd by 2029. The accelerated timeline reflects the surge in demand for Canadian crude as Asian and European buyers scramble to diversify away from unavailable Middle Eastern supply, consistent with the IEA's observation this week that the crisis is reshaping global energy investment strategies.