Crude oil prices extended losses for a second day today (06), after President Trump said the United States would pause its plan to escort vessels out of the Strait of Hormuz just a couple of days after it was announced.
The news prompted expectations that a peace deal may be in the making, pressuring Brent crude below $107 and West Texas Intermediate tumbling to under $100. At the time of writing, Brent crude was trading at 106.50 per barrel, and WTI was changing hands for $98.55 per barrel.
“We have mutually agreed that, while the Blockade will remain in full force and effect, Project Freedom … will be paused for a short period of time to see whether or not the Agreement can be finalised and signed,” the U.S. president wrote on social media.
Earlier in the week, the U.S. Central Command reported two destroyers had escorted two U.S. merchant vessels out of the Strait of Hormuz. Iran’s reaction was swift, with the country’s army threatening strikes on U.S. military vessels in the area. Iran said it had fired warning shots at one U.S. warship. The U.S. Central Command denied the report.
Oil prices were under pressure following Trump’s original announcement, but then started to climb after Iran made clear that it would attack any forces that approached the Strait. Then, after Trump’s latest social media announcement, prices began to deflate, even though there have been no concrete steps towards a peace agreement.
Instead, U.S. Secretary of State Marco Rubio asked the United Nations to intervene and “call on Iran to stop blowing up ships, remove the mines, and allow humanitarian relief. If the international community can’t rally behind this and solve something so straightforward, then I don’t know what the utility of the UN system is.” (Oil Price)