By Helen Clark and Jeslyn Lerh
SINGAPORE, May 6 (Reuters) – Oil prices fell for a second day on Wednesday on expectations bottled-up supply from the key Middle East producing region could resume flowing after U.S. President Donald Trump indicated a possible peace deal may be reached to end the war with Iran.
Brent crude futures fell $1.89, or 1.7%, to $107.98 a barrel as of 0340 GMT, after dropping 4% in the previous session. U.S. West Texas Intermediate futures eased $1.83, or 1.8%, to $100.44, after settling down 3.9% the day before.
On Tuesday, Trump unexpectedly said he would briefly pause an operation to help escort ships through the Strait of Hormuz, citing progress toward a comprehensive agreement with Iran, without giving details on the agreement. There was no immediate reaction from Tehran.
“This signals potential de-escalation and raises hopes for the release of stranded vessels inside the Gulf, which could gradually bring supply back to the market,” said Anh Pham, senior research specialist for oil at LSEG.
Pham added that prices remain elevated with both Brent and WTI staying above $100 per barrel as prospects for a peace deal remain uncertain, while it will take time for trade flows to be fully restored even if a deal is reached.
Trump said the U.S. Navy would continue its blockade of Iranian ports. 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 finalized and signed,” Trump wrote on social media.
Trump’s announcement came only hours after U.S. Secretary of State Marco Rubio briefed reporters on the effort, announced on Sunday, to escort stranded tankers through the strait. On Monday, the U.S. military said 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.
The Strait of Hormuz closure has drawn down global inventories as refineries try to make up the production shortfall.
U.S. crude oil inventories fell for a third week, while gasoline 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. Gasoline inventories fell by 6.1 million barrels, while distillate inventories fell by 4.6 million barrels compared to a week earlier, the sources said.
(Reporting by Helen Clark in Melbourne and Jeslyn Lerh in Singapore; Editing by Chris Reese and Christian Schmollinger)
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