Oil prices declined sharply on Wednesday after reports indicated that the United States had presented Iran with a 15-point proposal intended to bring the Middle East conflict to an end. The news raised expectations of a possible ceasefire that could help reduce disruptions to energy supplies in the region.
Brent crude futures dropped $4.17, or 4%, to $100.32 per barrel by 0708 GMT, after earlier falling to a session low of $97.57. U.S. West Texas Intermediate crude futures slipped $3.11, or 3.4%, to $89.24 per barrel, having previously declined to $86.72.
Both benchmarks had climbed nearly 5% on Tuesday before giving back some of those gains in volatile trading after the settlement.
“Expectations of a ceasefire have risen slightly and profit-taking is leading the market,” said Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, a unit of Nissan Securities. “But the outlook remains uncertain as to whether negotiations will succeed, limiting selling.”
U.S. President Donald Trump said on Tuesday that Washington was making progress toward negotiating an end to the war with Iran, while a source confirmed that the United States had delivered a 15-point settlement proposal to Tehran.
Israel’s Channel 2 reported that Washington was seeking a month-long ceasefire in order to discuss the plan, which includes dismantling Iran’s nuclear programme, ending support for proxy groups and reopening the Strait of Hormuz.
Some analysts remained cautious about the likelihood of rapid progress, warning that oil markets may continue to experience sharp price swings.
Oil shipments through Hormuz largely halted
Priyanka Sachdeva, senior market analyst at Phillip Nova, said developments in the Middle East would remain the “dominant price driver” keeping oil prices fluctuating widely in the near term.
The conflict has effectively halted shipments of oil and liquefied natural gas through the Strait, which normally carries about one-fifth of global gas and crude supply. The disruption has been described by the International Energy Agency as the largest oil supply interruption on record.
“The market outlook remains tight notwithstanding the prospects of a war off-ramp,” said Saul Kavonic, head of energy research at MST Marquee.
He added that even if shipments through the Strait resume, “it’s not clear all shut-in production will resume until there is more clarity on the durability of a ceasefire.”
Iran has informed the United Nations Security Council and the International Maritime Organization that “non-hostile vessels” may pass through the Strait of Hormuz if they coordinate with Iranian authorities, according to a note reviewed by Reuters on Tuesday.
Despite diplomatic signals, military strikes involving U.S., Israeli and Iranian forces have continued, and sources say Washington is preparing to deploy additional troops to the region.
To compensate for disruptions in Hormuz, oil shipments from Saudi Arabia’s Red Sea port of Yanbu increased to nearly 4 million barrels per day last week, a sharp rise compared with levels before the conflict began, according to shipping data.
In the United States, inventories of crude oil, gasoline and distillates all rose last week, according to market sources citing figures from the American Petroleum Institute on Tuesday.
Crude inventories increased by 2.35 million barrels in the week ending March 20, while gasoline stocks rose by 528,000 barrels and distillate inventories increased by 1.39 million barrels compared with the previous week, the sources said.