On Wednesday, oil prices experienced a modest decline following renewed assertions by former U.S. President Donald Trump that the conflict with Iran would conclude “very quickly.” Despite these remarks, investor sentiment remained cautious due to persistent uncertainties surrounding the outcomes of ongoing peace negotiations, coupled with continued disruptions to Middle Eastern supply resulting from the conflict. As a result, Brent crude oil futures had fallen by 0.8 percent, to USD 110.40 per barrel, while U.S. West Texas Intermediate futures declined by 0.6 percent, to USD103.48. Observers noted that a market once characterized by relentless upward momentum now resembles a slow-moving downturn.
According to analysts, benchmark prices softened in response to the prospect of a potential deal as the market continues to assess geopolitical developments. He further noted that even if an agreement is reached, prices are likely to retain some upside potential, given that crude supply is unlikely to return immediately to pre-war levels. Both benchmarks had already fallen by nearly one dollar on Tuesday, following remarks by U.S. Vice President JD Vance that the United States and Iran had made progress in talks, with neither side wishing to resume military action.
Oil Prices Unlikely to See Immediate Pre-War Supply Recovery
Furthermore, analysts observed that investors are keenly evaluating whether Washington and Tehran can genuinely find common ground and achieve a peace agreement, especially as the U.S. stance appears to shift on a daily basis. He added that oil prices are likely to remain elevated, considering the possibility of renewed U.S. attacks on Iran and expectations that, even under a peace deal, crude oil supply will not quickly revert to pre-war levels.
Despite Trump’s late Tuesday assertion to U.S. lawmakers that the conflict would end swiftly, he had earlier indicated that the United States might still need to strike Iran again, claiming he had been within an hour of ordering an attack before postponing it. These comments on the potential need for further military action came just one day after he announced a pause on planned hostilities, following a new proposal from Tehran to end the U.S.-Israeli war.
On the supply front, U.S. crude oil inventories fell for a fifth consecutive week, according to market sources citing data released Tuesday by the American Petroleum Institute, with fuel stocks also declining. Crude oil inventory also indicated that U.S. crude stockpiles reported by the Energy Information Administration were expected to have decreased by approximately 3.4 million barrels in the week ending May 15.
