Oil prices slump after Trump says US-Iran negotiations in ‘final stages’
By Nicole Jao
NEW YORK, May 20 (Reuters) – Oil prices fell 4 percent on Wednesday after U.S. President Donald Trump said talks with Iran were in the final stages, but investors remained cautious about the outcomes of peace talks as supply disruption in the Middle East continued.
Brent crude futures were down $4.76, or 4.28%, at $106.52 a barrel as of 11:29 a.m. EDT (1529 GMT) and U.S. West Texas Intermediate futures were down $4.22, or 4.05%, at $99.93 a barrel. Both contracts were on track for their biggest daily declines in percentage and absolute terms in two weeks.
U.S. President Donald Trump said on Wednesday that negotiations with Iran are in their final stages. However, he warned that further attacks could be carried out unless Iran accepts the deal.
“We’re in the final stages on Iran. We’ll see what happens. Either make a deal or we’ll do some bad things, but hopefully that won’t happen,” Trump told reporters on Wednesday.
But some market participants and analysts are cautious about the outcome of the talks and the global supply crunch that will likely continue even if the United States and Iran reach a deal.
Analysts at Citi said on Tuesday that they expect Brent crude to rise to $120 a barrel in the near term, noting that oil markets have underpriced the risk of prolonged supply disruptions, and Wood Mackenzie predicted that crude oil could approach $200 if the Strait of Hormuz remains largely closed through the end of the year.
Similarly, PVM analysts said global oil stocks could reach critically low levels. “However, as has been observed recently, market players are relatively indifferent (or indifferent) to what the conflict may bring,” PVM said.
The premium for Brent next month contracts over contracts for delivery six months out (an indicator of traders’ view of the current supply squeeze) is around $20 a barrel, well below last month’s high of over $35.
Russian Deputy Prime Minister Alexander Novak said on Wednesday that some countries have lifted sanctions on Russian oil because global markets cannot function without Russia.
Three supertankers were crossing the Strait of Hormuz on Wednesday carrying 6 million barrels of Middle Eastern crude oil bound for Asian markets after waiting more than two months in the Gulf. The number of ships passing through the strait is well below the around 130 ships that passed through the strait every day before the war.
It will take at least four months to return to 80% of pre-conflict flows, UAE ADNOC Chief Executive Officer Sultan Al Jaber said on Wednesday.
