Oil Prices Fall, Focus on Middle East Ceasefire and Trump-Xi Summit
Oil prices fell on Wednesday, snapping a three-day rally as market participants awaited developments on the fragile ceasefire in the Middle East and ahead of a summit in Beijing between U.S. President Donald Trump and Chinese President Xi Jinping.
Brent crude fell 19 cents (0.2%) to $107.58/barrel at 0909 GMT, while WTI fell 39 cents (0.4%) to $101.79/barrel.
Despite the declines, both benchmarks have remained around or above $100/barrel since the outbreak of the U.S.-Israel war with Iran in late February, after Tehran effectively closed the Strait of Hormuz. Analysts believe the market remains highly reactive to any updates from the region, potentially leading to high volatility if there is any escalation or new threat to supply flows.
Selling pressure was also curbed after the International Energy Agency (IEA) stated that global oil supply this year is expected to fall short of total demand due to production disruptions in the Middle East, along with indications of a decline in inventories in the past two months. The IEA also highlighted Russia's oil production, which fell 460,000 bpd in April (year-on-year) to around 8.8 million bpd, amid intensified Ukrainian drone attacks on energy targets.
On the geopolitical front, prices briefly strengthened by more than 3% on Tuesday as hopes for a lasting US-Iran ceasefire faded, dimming the chances of reopening Hormuz, through which about a fifth of global oil and LNG flows normally pass. Trump has said he doesn't need China's help to end the war, while China remains the largest buyer of Iranian oil despite sanctions pressure from Washington, making the Trump-Xi meeting on Thursday-Friday a market focus.
From a macro perspective, the surge in US inflation in April reinforced expectations that the Fed will keep interest rates high for longer, potentially depressing oil demand through higher borrowing costs.
Market attention is also focused on US inventory data: market sources citing the API said crude oil stocks fell last week for the fourth consecutive week, with official government data scheduled for release on Wednesday.
Source: Newsmaker.id
