Following US President Donald Trump’s repeated claims that the Iran conflict will end “very quickly,” oil prices fell more than 2% on Wednesday. However, investors are still cautious about the success of peace negotiations as supply interruption to the Middle East persists. By 1304 GMT, US West Texas Intermediate futures were down $2.30, or 2.2%, at $101.85, while Brent oil futures down $2.70, or 2.4%, to $108.58 per barrel. In terms of percentage and absolute terms, both contracts were on the verge of their largest daily declines in the previous two weeks.
According to LSEG research analyst Emril Jamil, “prices are likely to still exhibit some upside potential even if a deal is concluded, given that supply will likely not return to pre-war levels immediately.” Following US Vice President JD Vance’s announcement that negotiations between the US and Iran had advanced, both benchmarks dropped by almost $1 on Tuesday. However, Trump also stated that it might be necessary for the US to attack Iran once more and that the attack was just one hour away from being ordered before it was postponed. Brent crude could reach $200 if the Strait of Hormuz remains mostly closed until the end of the year, according to Wood Mackenzie, while analysts at Citi said on Tuesday that they expected the price to rise to $120 per barrel in the near future because oil markets are undervaluing the risk of a protracted supply disruption.
Global oil stocks may also drop to dangerously low levels, according to PVM analysts. However, according to PVM, “market players are comparatively nonchalant (or complacent) about what the conflict might bring.” An indicative of traders’ perceptions of the current tightness in supply, the premium on Brent contracts for delivery next month over contracts for delivery in six months is about $20 per barrel, much below last month’s highs above $35. According to the state TASS news agency, Russian Deputy Prime Minister Alexander Novak stated on Wednesday that some nations were removing sanctions on Russian oil because the world’s markets cannot operate without it.
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