Oil Prices Slide as Trump Indicates Possible Iran Peace Deal
US President's announcement sparks hopes for de-escalation and potential supply increase.
Oil prices declined for a second consecutive day on Wednesday, amid growing expectations that the flow of oil from the key Middle East producing region may resume after US President Donald Trump hinted at a possible peace deal with Iran.
Brent crude futures decreased by $1.69, or 1.5%, to $108.18 per barrel by 09:40 a.m. Saudi time, following a 4% drop in the previous session.
US West Texas Intermediate futures also fell, down $1.67, or 1.6%, to $100.60, after declining 3.9% the day before.
On Tuesday, Trump unexpectedly announced a temporary pause on an operation to escort ships through the Strait of Hormuz, citing progress towards a comprehensive agreement with Iran.
Tehran has yet to respond to this development.
According to Anh Pham, senior research specialist for oil at LSEG, this signals potential de-escalation and raises hopes for the release of stranded vessels inside the Gulf, which could gradually restore supply to the market.
However, prices remain elevated as the prospects for a peace deal remain uncertain.
It is expected that it will take some time for trade flows to be fully restored even if a deal is reached.
The ongoing blockade imposed by the US Navy on Iranian ports has contributed to higher prices, with Brent trading at its highest since March 2022 last week.
Trump's announcement came hours after US Secretary of State Marco Rubio briefed reporters on Sunday about the effort to escort stranded tankers through the strait.
On Monday, the US military stated that it had destroyed several Iranian small boats, as well as cruise missiles and drones, while guiding two vessels out of the Gulf through the Strait.
The closure of the Strait of Hormuz has resulted in a decrease in global inventories as refineries struggle to make up for the production shortfall.
US crude oil inventories fell for the third consecutive week, with gasoline and distillate stocks also declining.
Crude stocks decreased by 8.1 million barrels during the week ended May 1, while gasoline inventories fell by 6.1 million barrels, and distillate inventories declined by 4.6 million barrels compared to the previous week.
Brent crude futures decreased by $1.69, or 1.5%, to $108.18 per barrel by 09:40 a.m. Saudi time, following a 4% drop in the previous session.
US West Texas Intermediate futures also fell, down $1.67, or 1.6%, to $100.60, after declining 3.9% the day before.
On Tuesday, Trump unexpectedly announced a temporary pause on an operation to escort ships through the Strait of Hormuz, citing progress towards a comprehensive agreement with Iran.
Tehran has yet to respond to this development.
According to Anh Pham, senior research specialist for oil at LSEG, this signals potential de-escalation and raises hopes for the release of stranded vessels inside the Gulf, which could gradually restore supply to the market.
However, prices remain elevated as the prospects for a peace deal remain uncertain.
It is expected that it will take some time for trade flows to be fully restored even if a deal is reached.
The ongoing blockade imposed by the US Navy on Iranian ports has contributed to higher prices, with Brent trading at its highest since March 2022 last week.
Trump's announcement came hours after US Secretary of State Marco Rubio briefed reporters on Sunday about the effort to escort stranded tankers through the strait.
On Monday, the US military stated that it had destroyed several Iranian small boats, as well as cruise missiles and drones, while guiding two vessels out of the Gulf through the Strait.
The closure of the Strait of Hormuz has resulted in a decrease in global inventories as refineries struggle to make up for the production shortfall.
US crude oil inventories fell for the third consecutive week, with gasoline and distillate stocks also declining.
Crude stocks decreased by 8.1 million barrels during the week ended May 1, while gasoline inventories fell by 6.1 million barrels, and distillate inventories declined by 4.6 million barrels compared to the previous week.
