Oil Prices Decline After Three-Day Rally
Oil prices moved lower on Wednesday after posting gains for three consecutive sessions, as traders continued to monitor disruptions in the Strait of Hormuz and awaited talks between U.S. President Donald Trump and Chinese President Xi Jinping.
Brent crude futures for July delivery fell 1.3% to $106.38 per barrel by 02:32 ET (06:32 GMT), while West Texas Intermediate (WTI) crude futures dropped 1.4% to $100.80 per barrel.
Both oil benchmarks had surged more than 3% during the previous trading session.
Strait of Hormuz Disruptions Continue
Market sentiment remained tense after Trump stated that prospects for a ceasefire agreement with Iran were “on life support” following Tehran’s rejection of U.S.-supported peace proposals.
The Strait of Hormuz, a critical global shipping route responsible for roughly 20% of worldwide oil consumption flows, remains largely closed to commercial traffic after Iran tightened restrictions following the outbreak of conflict earlier this year.
The U.S. Energy Information Administration said on Tuesday that it now expects the strait to remain effectively closed through late May, increasing pressure on global oil supplies.
The agency estimated that global oil inventories could decline by 2.6 million barrels per day this year, while Brent crude prices may average around $106 per barrel during May and June.
Trump-Xi Summit in Focus
Investors are also closely watching the May 14-15 summit between Trump and Xi in Beijing. Discussions are expected to focus on the Iran conflict, trade relations, tariffs, and global energy security.
Trump is scheduled to arrive in Beijing on Wednesday, with official bilateral meetings and a state banquet planned for Thursday, followed by additional discussions on Friday.
Saudi Aramco Warns of Long-Term Market Disruptions
Saudi Aramco CEO Amin Nasser warned that global oil markets may not fully recover until 2027 because of prolonged disruptions linked to the Strait of Hormuz crisis.
Saudi Arabia has increased usage of its East-West pipeline in an effort to bypass the strait, although analysts noted that alternative routes cannot fully replace blocked Gulf oil exports.
U.S. Inventory Data and Inflation Remain Key Drivers
Data released by the American Petroleum Institute late Tuesday showed that U.S. crude inventories declined by 2.188 million barrels in the week ending May 8, marking the fourth consecutive weekly drop in stockpiles.
Markets are also reacting to recent U.S. inflation data, which indicated that price pressures remain elevated and could complicate the Federal Reserve’s monetary policy outlook.
Investors are now awaiting upcoming U.S. producer price index data for additional signals regarding inflation trends and potential Federal Reserve policy decisions.
Analysts noted that prolonged higher U.S. interest rates could slow global fuel demand growth, partially offsetting oil price gains caused by supply disruptions.
