* US official tells Reuters Israel, Hezbollah agreed to
ceasefire
* Switzerland says US talks with Iran will not take place on
Friday
* OPEC sticks to robust oil demand outlook, sees no peak on
horizon
* Israel hits Lebanon with deadly strikes, says four of its
troops are killed
(Updates prices, adds Israel, Hezbollah ceasefire agreement)
By Anushree Mukherjee and Seher Dareen
BENGALURU/LONDON, June 19 (Reuters) - Brent crude fell on
Friday after Israel and Hezbollah agreed to a ceasefire, easing
concerns over disruptions to Middle East oil supplies and
raising hopes of broader de-escalation involving the United
States and Iran.
Brent crude futures were down 85 cents, or 1.1%, at
$79 a barrel by 1303 GMT, and were heading for a weekly decline
of 9.5%.
The front-month July contract for U.S. West Texas
Intermediate crude, which expires on Monday, fell 64
cents, or 0.8%, to $75.96 a barrel, on track to fall nearly 10%
on the week. The more actively traded August contract was
down61 cents at $75.24 a barrel.
Israel and Hezbollah have agreed to a ceasefire which began
at 4 p.m. local time (1300 GMT) on Friday, a senior U.S.
official told Reuters.
"We understand that after the exchange of fire earlier
today, Israel and Hezbollah are now in a ceasefire," the
official said.
"I see limited downside from here. Prices may soften
slightly, but likely won't revisit earlier levels since reserves
are largely depleted and need replenishment with fresh crude,"
said Fawad Razaqzada, market analyst at City Index and
FOREX.com.
Earlier, Switzerland had said U.S. talks with Iranian
negotiators on a pact to end the Middle East conflict would not
take place on Friday, as Vice President JD Vance dropped his
travel plans, adding to uncertainty over the prospects for a
lasting truce.
"It lays bare the rocky road that lies ahead to achieve a
full and uninterrupted resumption of oil flow through the
Strait," said Tamas Varga, analyst at PVM Oil Associates.
"Undoubtedly, headlines around the extended ceasefire
agreement will continue to shape sentiment."
Both benchmarks hit their lowest since the early days of the
conflict on Thursday as several tankers, including three
Saudi-flagged vessels carrying 6 million barrels of crude,
sailed through the strait hours after the U.S. and Iranian
presidents signed an interim deal to end their war.
Analysts expect the deal to release more than 85 million
barrels of oil stranded in the Middle East Gulf into global
markets. The agreement also includes the lifting of U.S.
sanctions on Iranian oil, which would add more supply.
Around 20% of global oil and LNG supply transits Hormuz, but
recovery in flows and production after the U.S.-Iran deal could
take several months.
Citi said its base case, with a 60% probability, sees
sustained normalisation in flows, with oil markets moving into
surplus and prices trending lower over the next six to 12 months
to around $60 to $65 per barrel by the first quarter of 2027.
Commerzbank said oil supply should gradually recover,
lowering its Brent forecast to $80 a barrel by year-end from
$85, while expecting prices to remain above pre-war levels for
most of the coming year.
Iraq's oilfields are ready to resume production and output
will gradually return to normal, restoring previous rates, Oil
Minister Basim Mohammed said.
On the demand front, world demand will rise to 113.3 million
bpd in 2030 from 105.1 million barrels per day in 2025, OPEC
said in its 2026 World Oil Outlook.