Crude oil prices slumped by more than 6% to $102.79 per barrel on Wednesday, 6 May, after President Donald Trump said the US had made progress toward a final agreement with Iran.
Brent crude futures were down by $6.70, or 6.1%, to $103.17 a barrel by 0856 GMT after hitting their lowest point in nearly two weeks. US West Texas Intermediate dropped $6.77, or 6.6%, to $95.50. Both benchmarks had lost roughly 4% in the previous trading session.
The decline in supply caused by the halt in marine traffic through the Strait of Hormuz since February has pushed oil prices higher, with Brent trading at its highest level since March 2022 last week.
However, Trump announced on Tuesday that he would temporarily suspend an operation to escort vessels through the strait, citing advancements toward a comprehensive agreement with Iran. He did not reveal specifics but mentioned that the US Navy would maintain its blockade of Iranian ports.
Iran, for its part, stated that it would agree only to a just and all-encompassing deal, with Foreign Minister Abbas Araqchi not directly responding to Trump’s suggestion of pausing US escorts for ships.
On Monday, the US military reported that it had destroyed multiple Iranian small boats as part of its efforts to assist stranded vessels in leaving the narrow waterway.
The closure of the Strait of Hormuz has reduced global oil and fuel supplies as refineries work to offset production deficits.
As reported by Reuters, US crude oil stockpiles have decreased for the third week in a row, along with reductions in gasoline and distillate inventories, according to data from the American Petroleum Institute.
Crude oil inventories dropped by 8.1 million barrels for the week ending 1 May. At the same time, gasoline supplies fell by 6.1 million barrels, and distillate stocks reduced by 4.6 million barrels, suggesting diminished supply across essential fuel categories, as noted in the Reuters news report.
(more to come)