West Texas Intermediate (WTI) crude oil prices plunged more than 5% on Wednesday, ending a four-day rally, as traders responded to new geopolitical developments suggesting progress in negotiations between the US and Iran to end the ongoing conflict and potentially reopen the Strait of Hormuz. At the time of reporting, WTI was trading around $96.76 per barrel [1]. US President Donald Trump stated that negotiations with Iran were in their final stages but cautioned that military action remained possible if no agreement was reached, saying, 'There’s more fighting to come unless Iran gets smart' [1].
Diplomatic efforts, mediated by Pakistan, are ongoing, with reports that Pakistani army leader Asim Munir may travel to Iran on Thursday to announce the final version of the agreement [1]. Meanwhile, Iran’s Islamic Revolutionary Guard Corps (IRGC) Navy confirmed that transit through the Strait of Hormuz continues with permits and coordination from Iranian authorities, noting that 26 vessels, including oil tankers and container ships, passed through the Strait in the past 24 hours [1]. Reuters reported that several supertankers carrying approximately 6 million barrels of crude successfully exited the Strait this week [1].
These developments have alleviated immediate concerns about supply disruptions, contributing to the sharp intraday pullback in crude prices. However, broader supply concerns persist as the Strait of Hormuz is still operating below normal capacity, which has limited further declines in oil prices. The ongoing fragility of negotiations and unresolved issues regarding Iran’s nuclear program continue to fuel market uncertainty [1].
On the data front, the US Energy Information Administration (EIA) reported a significant drawdown in US crude oil inventories, with a decrease of 7.864 million barrels for the week ended May 15, compared to market expectations for a 2.9 million-barrel draw and a previous week’s decline of 4.306 million barrels [1].
CONCLUSION
WTI crude oil experienced a sharp decline as hopes for a US-Iran agreement and improved Strait of Hormuz flows eased immediate supply fears. However, ongoing negotiations and below-normal transit levels through the Strait continue to inject uncertainty into the market. The larger-than-expected US crude inventory draw adds another layer of complexity to the supply outlook.