Oil prices pares gains after Iran announces end to attacks on Israel

LONDON, June 8 (Reuters) – Oil prices pared gains on Monday, after rising more than 5% earlier in the session, following an announcement from Iran‘s military that a wave of attacks on Israel was over.

However, Iran warned of harsher attacks if Israel continues strikes on Lebanon.

Brent crude futures were up $1.43, or 1.5% at $94.52 a barrel as of 1304 GMT, while U.S. West Texas Intermediate crude futures were up $1.03, or 1.1%, at $91.57.

Prices had gained over 5% earlier after renewed Israeli strikes on Iran and attacks on Lebanon had reduced hopes of an imminent end to the wider war. Brent has risen around 31% since the eve of the conflict just over 100 days ago, while WTI has risen around 37%. Brent in April touched a peak above $126 a barrel.

Israel hit a petrochemical plant in southwestern Iran that it said was used to produce ballistic missiles, and Iran’s Islamic Revolutionary Guard Corps said the country retaliated with a strike aimed at a similar Israeli facility in the city of Haifa.

The exchange followed Israeli strikes on strongholds of Iran-backed Hezbollah in Beirut over the weekend. Tehran has repeatedly said any deal with Washington to end the conflict must include a halt to Israel’s campaign in Lebanon.

TRUMP DEMANDS A HALT

U.S. President Donald Trump on Monday demanded that Israel and Iran “immediately stop ‘shooting'”.

Because of the strikes, investors were concerned that flows through the Strait of Hormuz might remain restricted for longer, UBS analyst Giovanni Staunovo said.

Roughly a fifth of the world’s daily supply of oil and liquefied natural gas passed through the Strait of Hormuz off Iran before U.S.-Israeli airstrikes at the end of February unleashed the latest escalation of the Middle Eastern conflict.

On Monday, Iran’s ambassador to Moscow was quoted as saying that the Strait would be open but under conditions to be set by Iran and Oman, including a transit fee.

“For markets, the best near-term outcome remains a ‘skinny’ deal that decouples Strait disruption and active strikes from the underlying sources of disagreement, buying time without resolving them,” said Erik Meyersson with SEB Research.

OPEC+ AGREES OUTPUT TARGET INCREASE

In the face of the resulting supply crisis, OPEC+ on Sunday agreed its fourth oil output target increase in four months.

Analysts said the decision would have little impact since most members of OPEC+, which groups the Organization of the Petroleum Exporting Countries and allies including Russia, cannot meet their targets because of the closure of the Strait or, in the case of Russia, Ukrainian drone attacks that have eroded its production capacity.

“In the current market, the physical impact of such a decision would be close to zero,” Jorge Leon, Rystad Energy’s head of geopolitical analysis, said in a note to clients.

Saudi Arabia has cut its official selling prices for crude oil to Asia in July for a second month.

(Reporting by Stephanie Kelly, Helen Clark and Colleen Howe; editing by Christopher Cushing, Edwina Gibbs, Jason Neely and Barbara Lewis)