Oil prices retreated during Thursday's Asian trade as a ceasefire agreement between Israel and Lebanon raised hopes of broader de-escalation across the Middle East, easing concerns over potential disruptions to global energy supplies.
By 2:45 pm AEST (4:45 am GMT), Brent crude futures were down US$0.84, or 0.9%, at $96.97 a barrel, while U.S. West Texas Intermediate crude fell $0.82, or 0.9%, to $95.20 a barrel.
The declines followed strong gains in the previous session, when Brent and WTI rose 1.9% and 2.4%, respectively, amid renewed hostilities in the region.
Those gains came after Iranian attacks on Kuwait and U.S. military strikes near the Strait of Hormuz heightened concerns over energy security and shipping routes.
Market sentiment improved after Israel and Lebanon agreed to implement a ceasefire, fuelling hopes that diplomatic efforts could eventually lead to a broader agreement to end the conflict involving the United States, Israel and Iran.
Political developments in Washington also remained in focus. The Republican-led U.S. House of Representatives approved a resolution on Wednesday seeking to block President Donald Trump from continuing military operations against Iran without congressional authorisation.
For the measure to take effect, it would require Senate approval and a two-thirds majorities in both chambers of Congress to override what is widely expected to be a presidential veto.
Meanwhile, signs of ongoing diplomatic engagement between Tehran and Washington provided additional support for easing geopolitical concerns.
According to reports from Iran International, Iranian Foreign Minister Abbas Araqchi said on Wednesday that communication channels with the United States remained open, although negotiations had yet to produce a breakthrough.
Investors also assessed fresh inventory data from the United States, which pointed to tighter crude supplies.
The Energy Information Administration (EIA) reported that U.S. crude stockpiles fell by 7.97 million barrels to 433.7 million barrels in the week ended 29 May. The draw was significantly larger than market expectations for a decline of around 4 million barrels.
