Brent drops to $106, WTI to $101 as fragile Iran ceasefire, Trump-Xi summit fuel market uncertainty
Oil prices fell on Wednesday, snapping a three-day rally as investors awaited developments around thefragile Middle East ceasefireand braced for ahigh-stakes summit in Chinabetween United States President Donald Trump. President Xi Jinping.
Brent crude futures dropped $1.22. or 1.1%, to $106.55 a barrel at 0410 GMT while US West Texas Intermediate futures fell $1.16, or 1.1%, to $101.02.
Both benchmarks have largely hovered around or above the $100 per barrel mark since the US. Israel beganattacks on Iranat the end of February, and Tehran effectivelyshut the Strait of Hormuz.
"Concerns over supply disruptions and uncertainty surrounding the Middle East are keeping oil prices well supported. even as traders struggle to establish a clear direction," said Priyanka Sachdeva, senior market analyst at Phillip Nova.
"The market remains highly reactive to every update from the region, meaning sharp swings are likely to persist. Any further escalation or direct threat to supply flows could quickly revive strong upside momentum in both Brent. WTI," added Sachdeva.
Read:Oil prices rise as fragile US-Iran talks sustain supply worries
Oil prices rose by over 3% on Tuesday, extending earlier gains as hopes for a lasting US-Iran ceasefire faded, dimming prospects of reopening the strait, through which about a fifth of global oil. liquefied natural gas normally flows.
Trump said on Tuesday he does not think he will needChina's helpto end the war with Iran, even as hopes for a lasting peace deal dwindled. Tehran tightened its grip over the strait.
China is the biggest buyer of Iranian oil despite pressure from the Trump administration. Trump meets his Chinese counterpart, Xi, in Beijing on Thursday and Friday.
"The length of the disruption. the scale of the supply loss - alreadymore than 1 billion barrels- means oil prices are likely to remain above $80 per barrel for the rest of the year," Eurasia Group said in a client note.
Read More:'Iran very much under control,' Trump asserts ahead of China trip
The war with Iran has started to take its toll on the US economy, the world's biggest, as higher oil prices lead to more expensive fuels,. economists expect to see second-round effects in the months ahead.
In April. US consumer prices rose sharply for a second straight month, resulting in thelargest annual increasein inflation in nearly three years, bolstering expectations that the Federal Reserve would keep interest rates flat for a while.
"The marked increase in inflation across advanced economies has yet to cause real spending to contract, but the widespread decline in consumer sentiment. hiring intentions points to worse to come,"Capital Economicssaid in a client note.
Elevated interest rates make borrowing more expensive, potentially denting demand for oil.
As theIran war continues, US crude oil inventories fell for a fourth straight week last week,. distillate inventories also declined, according to market sources citing American Petroleum Institute data.
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