SINGAPORE: Oil prices eased on Wednesday after U.S. President Donald Trump again asserted the war with Iran will end "very quickly", though investors remain wary about the outcome of peace talks amid continued disruptions to Middle East supply from the conflict.
Brent crude oil futures fell 88 cents, or 0.8%, to $110.40 a barrel by 0410 GMT, while U.S. West Texas Intermediate futures were down 67 cents, or 0.6%, to $103.48.
"Benchmark prices softened on a potential deal as the market gauges the geopolitical outcomes," said Emril Jamil, a senior oil research analyst at LSEG.
"However, prices are likely to still exhibit some upside potential even if a deal is concluded, given that supply will likely not return to pre-war levels immediately," he said.
Both benchmarks fell nearly $1 on Tuesday after U.S. Vice President JD Vance said the U.S. and Iran had made progress in talks, with neither side wanting to see a resumption of military action.
"Investors are keen to gauge whether Washington and Tehran can actually find common ground and reach a peace agreement, with the U.S. stance shifting daily," said Toshitaka Tazawa, an analyst at Fujitomi Securities.
"Oil prices are likely to remain elevated given the possibility of renewed U.S. attacks on Iran and expectations that, even if a peace deal is reached, crude supply will not quickly return to pre-war levels," he said.
Despite Trump's assertion to U.S. lawmakers late on Tuesday about a quick end to the conflict, he earlier said the United States may need to strike Iran again and he had been an hour away from ordering an attack before postponing it.
His comments on the need to strike again came a day after he said he had paused a planned resumption of hostilities following a new proposal by Tehran to end the U.S.-Israeli war.
Trump also said Iran's leaders are begging for a deal and warned a new U.S. attack would happen in coming days if no agreement was reached.
Citi on Tuesday said it expects Brent crude to rise to $120 a barrel in the near term, stating that oil markets are under-pricing the risk of a prolonged supply disruption and broader tail risks.
Some tankers have recently managed to cross through the Strait of Hormuz though the number of shipments remain well below the 130 or so ships that typically transited before the war.
Two Chinese supertankers carrying 4 million barrels of Middle East crude oil exited the Strait of Hormuz on Wednesday, after waiting in the Gulf for more than two months.
To make up the shortfall in global supplies from the war, countries are relying on their commercial and strategic inventories.
In the U.S., crude oil inventories fell for a fifth straight week last week, according to market sources citing American Petroleum Institute data released on Tuesday, while fuel stocks also fell.
U.S. crude stockpiles reported by the Energy Information Administration are expected to have fallen by about 3.4 million barrels in the week to May 15, according to a Reuters poll. The weekly EIA data is due later on Wednesday. - Reuters
