Oil prices eased in Asian trading on Wednesday after three straight sessions of gains, as market participants weighed ongoing shipping disruptions through the Strait of Hormuz alongside U.S. inventory and inflation data.
At 20:19 ET (00:19 GMT), July Brent futures were down 0.4% at $107.36 per barrel, while West Texas Intermediate futures slipped 0.3% to $101.91 per barrel. Both benchmarks had risen by more than 3% in the previous session.
Geopolitical developments kept markets on edge. U.S. President Donald Trump said prospects for a ceasefire with Iran were on "life support" and rejected Tehran's latest response to U.S.-backed peace proposals, comments that heightened concern the conflict could continue.
The Strait of Hormuz - a chokepoint that normally carries about one-fifth of global oil consumption - remains largely closed to commercial traffic after Iran tightened restrictions following the outbreak of war earlier this year. That disruption has prompted revisions to supply and inventory outlooks.
The U.S. Energy Information Administration said on Tuesday it now expects the Strait to remain effectively closed through late May, a development that would force a much steeper drawdown in global inventories than previously forecast. The agency estimated global stockpiles could shrink by 2.6 million barrels per day this year. It also projected that Brent prices may average about $106 per barrel in May and June.
Industry voices have underscored the potential for a long recovery. Saudi Aramco CEO Amin Nasser warned that the oil market may not fully recover until 2027 due to prolonged disruptions linked to Hormuz. Saudi Arabia has increased use of its East-West pipeline to route crude around the strait, though analysts noted those alternative pathways cannot fully replace blocked Gulf exports.
Market supply data added to the bullish backdrop. Data from the American Petroleum Institute released late Tuesday showed crude stocks fell by 2.188 million barrels in the week ended May 8, marking the fourth straight weekly decline.
At the same time, economic signals are complicating the outlook. Tuesday's U.S. consumer price index report showed inflation remained firm, which clouds the outlook for Federal Reserve policy. Investors were awaiting U.S. producer price index data due later on Wednesday for additional signals on underlying price pressures and the central bank's likely next steps.
Higher-for-longer U.S. interest rates, if maintained, could weigh on global fuel demand growth and thereby partially offset price gains driven by constrained supply. Traders and analysts are therefore balancing supply-side risks tied to Hormuz with demand-side uncertainty tied to the inflation and rate outlook.
Brief summary
Oil paused after a three-day rally as concerns about a near-shutdown of the Strait of Hormuz and related supply risks were assessed alongside U.S. inventory draws and inflation data that could influence Federal Reserve policy and global fuel demand.
Key points
- Brent futures at $107.36 and WTI at $101.91 after both rose more than 3% in the prior session.
- The EIA now expects the Strait of Hormuz to remain effectively closed through late May, projecting a 2.6 million barrels-per-day decline in global stockpiles for the year and Brent averaging about $106 in May and June.
- Inflation data and central bank policy risks could temper fuel demand growth, offsetting some supply-driven price pressure.
Risks and uncertainties
- Prolonged disruption in the Strait of Hormuz could continue to tighten global oil supplies, affecting energy markets and sectors reliant on fuel inputs.
- Firm U.S. inflation readings complicate the Federal Reserve outlook; higher-for-longer interest rates could slow demand growth for fuels, moderating price gains.
- Supply responses such as increased pipeline routing around the strait may not fully compensate for blocked Gulf exports, leaving oil markets vulnerable to further shocks.