Oil prices fall a second day as Trump indicates possible Iran peace deal

[MELBOURNE] Oil prices fell for a second day on Wednesday (May 6) on expectations bottled up supply from the key Middle East producing region could resume flowing after US President Donald Trump indicated a possible peace deal may be reached to end the war with Iran.

Brent crude futures for July fell US$1.52, or 1.38 per cent, to US$108.35 per barrel as at 9.03 am in Singapore, after dropping 4 per cent in the previous session. US benchmark West Texas Intermediate futures for June declined US$1.50, or 1.47 per cent, to US$100.77, after closing down 3.9 per cent the day before.

On Tuesday, Trump unexpectedly said that he would briefly pause an operation to help escort ships through the Strait of Hormuz, citing progress towards a comprehensive agreement with Iran, without giving details on the agreement.

There was no immediate reaction from Teheran, where it was very early on Wednesday morning.

Still, Trump said that the US Navy would continue its blockade of Iranian ports. The Strait of Hormuz, which typically carries cargoes equal to about one-fifth of the world’s oil and natural gas supply, has been most cut off since the US-Israeli war against Iran began on Feb 28.

The supply loss to the global market has pushed prices higher with Brent trading last week at its highest since March 2022.

“We have mutually agreed that, while the Blockade will remain in full force and effect, Project Freedom ... will be paused for a short period of time to see whether or not the Agreement can be finalised and signed,” Trump wrote on social media.

Trump’s announcement came only hours after US Secretary of State Marco Rubio briefed reporters on the effort, announced on Sunday, to escort stranded tankers through the strait.

On Monday, the US military said that it had destroyed several Iranian small boats, as well as cruise missiles and drones, while guiding two vessels out of the Gulf through the strait.

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Oil eases on signs US operation is loosening Iran’s Strait of Hormuz blockade

The Strait of Hormuz closure has drawn down global inventories as refineries try to make up the shortfall. US crude oil inventories fell for a third week, while petrol and distillate stocks also declined, market sources said on Tuesday, citing American Petroleum Institute figures.

Crude stocks fell by 8.1 million barrels in the week ended May 1, the sources said. Petrol inventories fell by 6.1 million barrels, while distillate inventories fell by 4.6 million barrels compared to a week earlier, the sources said. REUTERS