By: Economy Middle east

Global oil prices experienced a decline for the second consecutive day this Wednesday, driven by anticipations that restricted energy supplies from the vital Middle Eastern producing region might begin circulating once more. This shift in market sentiment follows comments from U.S. President Donald Trump, who suggested that a potential peace agreement could be finalized to resolve the ongoing conflict between the United States and Iran.

As of 8:50 a.m. UAE time, Brent crude futures decreased by 1.93 percent to reach $107.94 per barrel, building on a 4 percent drop observed during the prior trading session. Similarly, U.S. West Texas Intermediate futures softened by 1.8 percent to settle at $100.33, following a 3.9 percent decline recorded the previous day.

Diplomatic developments shift sentiment

On Tuesday, President Trump unexpectedly announced that he would temporarily halt an operation intended to escort maritime vessels through the Strait of Hormuz, attributing this decision to progress made toward a comprehensive deal with Iran, although he provided no specifics regarding the potential agreement. Tehran did not provide any immediate response to this announcement.

While the President noted the suspension of escort duties, he clarified that the U.S. Navy would maintain its existing blockade of Iranian ports. The recent loss of supply to the international market had previously driven prices upward, with Brent crude reaching its highest trading levels since March 2022 during the preceding week.

The President’s statement was released merely hours after U.S. Secretary of State Marco Rubio held a briefing for reporters concerning the initiative to assist stranded tankers through the strait, which had been formally announced on Sunday. On Monday, the U.S. military reported the destruction of various Iranian small boats, alongside cruise missiles and drones, during the successful navigation of two vessels out of the Gulf via the strait.

Inventory levels impact markets

The closure of the Strait of Hormuz has forced a drawdown on global inventories as refineries work to compensate for the significant production deficit.

According to a Tuesday report from Reuters, which cited data from the American Petroleum Institute, U.S. crude oil inventories experienced a decline for the third consecutive week, with accompanying drops observed in gasoline and distillate stocks. Market sources indicated that crude oil stockpiles contracted by 8.1 million barrels during the week ending May 1. During that same period, gasoline inventories decreased by 6.1 million barrels, while distillate inventories saw a reduction of 4.6 million barrels relative to the previous week.