RoydadNaft –  Brent crude futures fell by 87 cents (0.89%) to $96.92 per barrel. U.S. West Texas Intermediate (WTI) crude futures dropped by 78 cents (0.81%) to $95.24.

Oil prices declined on Thursday as a ceasefire agreement between Israel and Lebanon raised hopes for a broader deal to end the U.S.-Israel conflict with Iran — a deal that could lead to the reopening of the Strait of Hormuz.

Brent futures fell 87 cents, or 0.89%, to $96.92 per barrel (as of 04:58 GMT), while U.S. WTI crude fell 78 cents, or 0.81%, to $95.24. The decline offset some of the gains made earlier in the week.

Both Brent and WTI rose around 2% on Wednesday after fresh tensions in the Middle East, including Iranian attacks on Kuwait and U.S. military strikes near the Strait of Hormuz.

Israel and Lebanon announced late Wednesday that they had agreed on implementing a ceasefire. The news boosted hopes for a deal between Washington and Tehran, which Iran has partially conditioned on ending the fighting between Israel and Lebanon.

U.S. President Donald Trump said on Wednesday that progress in negotiations with Iran could be achieved by the end of this week.

Iranian Foreign Minister Abbas Araghchi said on Wednesday that contacts between Tehran and Washington had not been severed, but no progress had been made in the talks. He added that both sides are reviewing the exchanged texts.

In the United States, the Republican-led House of Representatives passed a resolution on Wednesday to prevent the continuation of Trump’s war against Iran. For the resolution to take effect, it requires Senate approval and a two-thirds majority in both chambers to override Trump’s near-certain veto.

Meanwhile, the U.S. Energy Information Administration reported that U.S. crude oil inventories fell by 8 million barrels to 433.7 million barrels in the week ending May 29. This drop was significantly larger than the 4 million barrels expected by analysts in a Reuters poll.

The International Energy Agency warned on Tuesday that if inventories continue to decline at the current pace, global oil stocks could reach critical levels before the peak of summer demand. This comes as China’s crude oil imports in May fell by 6 million barrels per day compared to March.

A note from ING Group stated: “Inventories have provided a cushion for the oil market. However, even if oil flows from the Strait of Hormuz resume in the near future, recovery will be slow and gradual.”

“This suggests that inventories are likely to remain under pressure through the third quarter of the year, which brings upside risk to prices.”