NEW YORK: Oil prices fell on Wednesday after US President Donald Trump said the country will end its war on Iran fairly soon.
The front-month Brent contract for June fell USD2.91, or 2.8 percent, to USD101.06 per barrel by 1:23 p.m. ET (1723 GMT), bouncing off a session low of USD98.35. US West Texas Intermediate crude futures for May slipped USD1.96, or around 1.9 percent, to USD99.42 per barrel, off a session low of USD96.50.
Trump, who plans to deliver a speech later in the day, told Reuters the US has ensured Iran will not have nuclear arms and is ready to get out of the war “pretty quickly”. He had signalled on Tuesday that the US could wind down the war in two to three weeks even without a deal.
Oil prices dropped more than USD3 a barrel on Tuesday after Trump’s remarks.
Market participants are betting that Trump will not allow oil supply disruptions caused by the Middle East war to extend into mid-May, when US gasoline demand is typically at its strongest, SEB analysts said.
“The risk to US gasoline prices, consumer sentiment and ultimately the November midterm elections makes a prolonged conflict politically costly,” they said.
READ MORE: WTI, June Brent crude futures settle down
On Monday, US gasoline prices rose above USD4 a gallon for the first time in more than three years.
In a social media post on Wednesday, Trump said Iran had asked for a ceasefire, but he will consider it only after Tehran stops blocking the Strait of Hormuz. Iran denied that it made any such request.
Iran has stopped vessels from crossing the Strait of Hormuz since the US and Israel launched attacks on the country at the end of February. This disrupted Middle Eastern oil exports and drove fuel prices higher globally. Analysts expect that energy flows through the Strait of Hormuz would be slow to return to levels before the conflict even if a ceasefire is announced.
“Clearing the vessel backlog would take time, with production, exports and LNG flows normalising only gradually rather than immediately,” ING analysts said.
Oil supply disruptions from the Middle East will increase in April and will hit Europe as the closure of the Strait of Hormuz hits exports further, International Energy Agency head Fatih Birol said on Wednesday.
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