Oil prices fell slightly on Wednesday after rising for three consecutive sessions, as investors monitored the fragile ceasefire linked to the Iran conflict and awaited talks between US President Donald Trump and Chinese President Xi Jinping.
Brent crude futures declined 82 cents, or 0.76%, to $106.95 a barrel, while US West Texas Intermediate (WTI) crude dropped 66 cents, or 0.65%, to $101.52 per barrel.
Despite the dip, both benchmarks have continued trading around or above the $100-per-barrel mark since the United States and Israel launched attacks on Iran at the end of February.
Strait of Hormuz Remains Key Concern
Markets remain focused on the status of the Strait of Hormuz, through which nearly one-fifth of global oil and liquefied natural gas supplies normally pass.
Oil prices had climbed more than 3% on Tuesday after hopes for a lasting ceasefire weakened, reducing expectations that the strategic shipping route could reopen soon.
Iran’s effective closure of the strait has become one of the central drivers of volatility in global energy markets.
Trump-Xi Meeting Draws Global Attention
Trump said on Tuesday that he did not believe he needed China’s help to end the conflict with Iran, even as tensions remained elevated.
The remarks came ahead of a scheduled summit between Trump and Xi in Beijing later this week.
China remains the largest buyer of Iranian oil despite pressure from Washington to reduce purchases.
Analysts Warn Supply Disruptions Could Persist
Analysts warned that prolonged disruption to oil flows could keep crude prices elevated for months.
According to the Eurasia Group, supply losses linked to the conflict have already exceeded 1 billion barrels.
The firm said oil prices could remain above $80 per barrel for the rest of the year if disruptions continue.
Rising Energy Costs Add to Inflation Pressures
The conflict has also begun affecting the wider global economy, particularly the United States, where higher fuel costs are contributing to inflation.
US consumer prices reportedly rose sharply for a second consecutive month in April, fuelling expectations that the Federal Reserve may keep interest rates higher for longer.
Analysts at Capital Economics warned that weakening consumer sentiment and slowing hiring trends could eventually weigh on economic growth.
Higher interest rates generally increase borrowing costs and can reduce fuel demand and broader economic activity.
US Oil Inventories Continue to Fall
Meanwhile, US crude inventories declined for a fourth straight week, according to market sources citing data from the American Petroleum Institute.
Distillate stockpiles also fell, adding to concerns about tightening supplies.
Official inventory figures from the US Energy Information Administration were expected later on Wednesday, with analysts forecasting another drop in stockpiles.
