Oil prices eased from recent highs during Asian trade on Wednesday as investors weighed reports that the United States plans to extend its blockade of Iranian ports, raising the prospect of prolonged supply disruptions from the Middle East.
U.S. President Donald Trump has instructed aides to prepare for an extended blockade of Iran, according to a Wall Street Journal report citing U.S. officials.
The move is expected to further restrict Iran’s oil exports by limiting shipping access to and from its ports, intensifying pressure on the country’s economy.
By 2:15 pm AEST (4:15 am GMT), Brent crude futures for July delivery slipped 30 cents, or 0.3%, to US$104.10 per barrel, while U.S. West Texas Intermediate (WTI) crude for June fell 58 cents, or 0.6%, to $99.35 per barrel.
The modest pullback follows strong gains in the previous session, when Brent rose 2.7%, and WTI advanced 3.7%.
Analysts at ANZ commented in a note to clients: "Stalled peace talks have raised the prospect of an indefinite disruption to oil supplies from the Persian Gulf. Iran reiterated its demand that the U.S. blockade of its ports must be removed before it considers reopening the Strait of Hormuz and hinted at maintaining some level of control indefinitely.
"Even so, more complex negotiations over the country’s nuclear program would not be discussed until much later, raising the prospect of ongoing tensions in the region.
"In the meantime, the U.S. continues to ratchet up pressure on Iran’s oil industry. It announced sanctions on 35 entities and individuals that oversee Iran’s shadow banking architecture. The administration also warned banks of sanctions exposure related to China’s ‘teapot’ refineries that may be importing Iranian oil."
Despite an ongoing ceasefire in the U.S.-Israeli conflict with Iran, negotiations remain deadlocked as both sides seek a formal resolution. Iran has effectively halted shipping through the Strait of Hormuz, a critical passage that accounts for around 20% of global oil and liquefied natural gas flows, while the United States continues its blockade of Iranian ports.
Washington is pushing for an end to Iran’s alleged nuclear weapons programme, while Tehran is demanding reparations following the latest conflict, alongside the easing of economic sanctions and some level of control over the Strait of Hormuz.
Adding to market uncertainty, the United Arab Emirates is set to exit OPEC on 1 May, marking a significant shift within the oil-producing alliance. The announcement follows weeks of heightened tensions, including missile and drone attacks on the UAE attributed to Iran.
On the supply side, data from the American Petroleum Institute showed U.S. crude inventories fell by 1.79 million barrels in the week ended 24 April, contrasting with expectations for a 0.3 million barrel build, further supporting oil prices.
