Oil Pares Early Losses, Edges Higher at $111.4 as Iran Supply Fears Persist 

Mumbai, May 20: Oil prices briefly eased on Wednesday after U.S. President Donald Trump said the conflict with Iran would end “very quickly”, but crude soon edged higher again as investors remained worried about potential supply disruptions in the Middle East.

Brent crude futures were last up 0.11% at $111.4 a barrel, while U.S. West Texas Intermediate (WTI) crude also recovered from early losses to trade marginally higher. The benchmarks had initially declined after Trump’s comments raised hopes of progress in negotiations between Washington and Tehran.

Diplomatic Hopes Offer Brief Relief

Sentiment improved briefly after Trump said the United States would end the Iran war “very quickly”, helping calm fears of an extended disruption to global energy supplies. The remarks came after U.S. Vice President JD Vance earlier indicated that talks between the two countries were making progress.

Both benchmarks edged back up as Trump’s comments signalling peace with Iran failed to convince. Source: Oilprice.com 

However, the decline in crude prices proved short-lived as traders continued to price in geopolitical risks tied to the conflict. Trump also warned that the U.S. could resume military action if negotiations fail, reinforcing concerns that tensions in the region remain far from resolved.

Strait of Hormuz Remains in Focus

Investors remain particularly focused on the Strait of Hormuz, a critical shipping route through which roughly one-fifth of the world’s oil supply passes. Any disruption to tanker movements through the narrow waterway could sharply tighten global crude supplies and trigger another spike in oil prices.

Analysts said the market continues to carry a sizeable geopolitical risk premium despite the possibility of diplomatic progress. Citi warned that Brent crude could climb to as high as $120 per barrel if the conflict escalates further or if oil shipments through the Gulf region are disrupted for a prolonged period.

Supply Outlook Stays Tight

The broader supply-demand outlook also remains tight. The International Energy Agency earlier said the Iran conflict could push global oil supply below demand this year, increasing the likelihood of continued volatility in energy markets. The agency highlighted geopolitical instability in the Middle East as one of the biggest threats to global supply balances.

Supporting crude prices further, industry data from the American Petroleum Institute showed U.S. crude inventories likely fell by 3.4 million barrels last week, indicating resilient fuel demand in the world’s largest oil consumer. Official inventory data from the U.S. Energy Information Administration is expected later in the day.

Inflation Worries Linger

Despite fluctuating during the session, oil prices remain significantly above levels seen before the latest escalation in the Middle East, keeping investors alert to the risks of higher inflation, tighter monetary policy and slower global economic growth.

Source:

• rates from oilprice.com