Crude oil fell on Wednesday after US President Donald Trump said the country would end its war on Iran fairly soon, with Brent crude down by $2.91 or 2.8 per cent to $101.06 per barrel, and the US West Texas Intermediate (WTI) crude down by $1.96 or 1.9 per cent to $99.42 per barrel.
The American President said the war in Iran could end in “two or three weeks,” adding that “we have had regime change” and that his “one goal” of ending Iran’s nuclear programme had been attained.
He also said Iran’s military was so reduced that the Strait of Hormuz would “automatically open,” although the US would “have nothing to do with” that. This development comes after Iran also expressed willingness to end hostilities.
According to market analysts, President Trump’s shift represents his concern over the war’s economic fallout and his realisation that events are no longer under his control.
This comes after Iran’s Islamic Revolutionary Guard Corps (IRGC) issued a direct threat to target 18 American technology and industrial companies in the Middle East, including Microsoft, Google, Intel, Tesla, IBM, Apple and Boeing.
Iran has stopped vessels from crossing the Strait of Hormuz since the US and Israel launched attacks on the country at the end of February. This disrupted Middle Eastern oil exports and drove fuel prices higher globally.
Analysts expect that energy flows through the Strait of Hormuz will be slow to return to levels before the conflict, even if a ceasefire is announced.
The head of the International Energy Agency (IEA), Mr Fatih Birol, warned that oil supply disruptions from the Middle East will increase in April and will hit Europe as the closure of the Strait of Hormuz hits exports further.
Crude oil output from the Organisation of the Petroleum Exporting Countries (OPEC) dropped by 7.5 million barrels per day in March from the previous month, as producers were forced to cut output because storage is full.
Crude oil inventories in the US increased by 5.5 million barrels during the week ending March 27, according to new data from the U.S. Energy Information Administration (EIA) released on Wednesday. The EIA’s data release follows figures by the American Petroleum Institute (API) that were released a day earlier, which reported that crude oil inventories saw a build of 10.263 million barrels in the period.