Oil prices declined on Wednesday following remarks by US President Donald Trump suggesting that the United States will soon conclude its conflict with Iran. By 1:23 p.m. ET (1723 GMT), the front-month Brent crude contract for June dropped $2.91, or 2.8%, settling at $101.06 per barrel, recovering from a session low of $98.35. Meanwhile, US West Texas Intermediate (WTI) crude futures for May fell $1.96, or about 1.9%, to $99.42 per barrel, after hitting a low of $96.50 earlier in the session.
Trump, who was scheduled to deliver a speech later in the day, stated that the US has ensured Iran will not acquire nuclear weapons and expressed readiness to end the war “fairly quickly.” On Tuesday, he had indicated the conflict could wind down within two to three weeks, even without a formal agreement. Following these comments, oil prices had already dropped by more than $3 per barrel on Tuesday.
Market analysts from SEB noted that investors are betting Trump will prevent oil supply disruptions caused by the Middle East conflict from extending into mid-May, a period when US gasoline demand typically peaks. They highlighted the political risks, stating, “The threat to US gasoline prices, consumer confidence, and ultimately the November midterm elections makes a prolonged conflict politically costly.” Notably, US gasoline prices surpassed $4 per gallon on Monday for the first time in over three years.
Meanwhile, conflicting signals continue between the US and Iran. On Wednesday, Trump posted on social media that Iran had requested a ceasefire, but he would only consider it if Tehran ceased blocking the Strait of Hormuz. Iran denied making such a request. Since late February, following US and Israeli attacks, Iran has prevented vessels from passing through the Strait of Hormuz, disrupting Middle Eastern oil exports and pushing global fuel prices higher.
Energy experts expect that even if a ceasefire is declared, restoring normal energy flows through the Strait of Hormuz will be gradual. ING analysts explained, “Clearing the vessel backlog will take time, with production, exports, and LNG flows normalizing slowly rather than immediately.” International Energy Agency head Fatih Birol warned that oil supply disruptions will intensify in April, particularly affecting Europe as the Strait’s closure further impedes exports.
The impact of the Strait of Hormuz closure is evident in crude output figures. In March, crude production from OPEC members fell by 7.5 million barrels per day compared to February, as producers were compelled to cut output due to full storage facilities. Additionally, US crude oil production dropped sharply in January, experiencing its largest decline in two years after a severe winter storm temporarily halted operations, data from the Energy Information Administration (EIA) released on Tuesday.
In response to the regional supply constraints, Saudi Arabia is expected to raise its official selling prices for crude oil destined for Asia to record highs, reflecting the premium on Middle Eastern oil globally, as indicated by an industry survey. Meanwhile, US crude inventories increased more than anticipated last week, EIA data published on Wednesday.
