WASHINGTON (dpa-AFX) - Partially offsetting the gains from the two previous sessions, crude oil prices have pulled back on Wednesday as the upcoming negotiations between the presidents of the U.S. and China have increased expectations of an end to the U.S.-Iran standoff despite OPEC and IEA oil forecast reports warning of a supply-demand mismatch.
WTI Crude Oil for June month delivery was last seen trading down by $1.04 (or 1.02%) at $101.14 per barrel.
The U.S.-Iran war entered day number 75 today, though now under ceasefire.
U.S. President Donald Trump is in China along with high-profile U.S. business leaders. Trump is set to meet Chinese President Xi Jinping to discuss a wide range of bilateral issues, including the ongoing gulf crisis.
Prior to his departure, Trump stated that the U.S. does not need China's help to end the war. He asserted that the U.S. will end the conflict either through 'negotiations or otherwise.'
Last weekend, Iran offered its response to a 14-point peace plan offered by the U.S. Trump called Iran's counterproposal 'totally unacceptable.' He also remarked that the ceasefire is now on 'massive life-support.'
CNN reported that disillusioned by Iran's approach to peace talks, Trump was planning to resume military operations against Iran.
Today, NBC News reported that the Pentagon is set to rename the Iran war as 'Operation Sledgehammer' (from Operation Epic Fury) if the ceasefire collapses. This could offer Trump a 60-day allowance to continue military operations before seeking the mandatory congressional approval.
Investors are now anticipating a resolution to the Middle East crisis through Chinese mediation. China is a close ally of Iran and the largest beneficiary of Iran's oil exports.
Away from Iran, Israel continued its attacks on Lebanon targeting Hezbollah militants, continuing to keep the Middle East tensions alive.
In its monthly oil market report, the International Energy Agency cautioned that global oil supply will not meet total demand this year. The report states that supply losses from Arabian nations already exceeded 1 billion barrels with more than 14 million barrels per day shut in.
The forecast for supply stands at 1.78 million bpd below the total demand for this year, contrary to the 0.41 million bpd surplus projected last month.
The Paris-based watchdog predicts that the supply will fall by nearly 3.90 million bpd through 2026 and warned that oil inventories are currently exhausting at an unprecedented pace and record. The agency forecasted a fall in demand by 0.42 million bpd.
The Organization of Petroleum Exporting Countries has predicted that oil demand will rise by 1,170,000 bpd in 2026, down from 1,380,000 million bpd expected previously.
Experts have already warned of oil 'demand destruction' following a slowdown in consumption due to rising prices.
On the inventory front, according to the U.S. Energy Information Administration, for the week ending May 8, crude oil inventories in the U.S. fell by 4,306,000 barrels to 452,900 barrels.
At the Cushing, Oklahoma delivery hub, inventories decreased by 1,702,000 barrels.
For the same period, gasoline inventories decreased by 4,084,000 barrels, distillate inventories increased by 190,000 barrels, and heating oil inventories increased by 153,000 barrels.
Data from the American Petroleum Institute revealed that the U.S. crude oil inventories fell by 2,190,000 barrels for the week ending May 8, marking a fourth straight weekly decline, and exceeding expectations of a 1,650,000 barrel decrease.
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