Oil Prices Dip Below $100 Amid Two-Week Ceasefire in Ukraine

Oil Prices Plummet Below $100 a Barrel Amid Hopes of Strait of Hormuz Reopening

New York - Oil prices fell sharply on Wednesday, plummeting below $100 a barrel, as hopes rose that the Strait of Hormuz would reopen after US President Donald Trump agreed to a two-week ceasefire with Iran. Brent crude futures settled $14.52, or 13.29%, lower at $94.75 a barrel, while US West Texas Intermediate crude slid $18.54, or 16.41%, to $94.41 a barrel.

The price drop was attributed to the anticipation of the strait reopening, which would allow energy supplies that have built up to pass through the shipping route. Andrew Lipow, founder of Lipow Oil Associates, stated that the market is hopeful that more oil will reach the market, but remains concerned that the ceasefire may not last.

The ceasefire, which was agreed upon by Trump and Iran, came shortly before the US president's deadline for Iran to open the strait or face widespread attacks on its civilian infrastructure. Approximately 20% of the world's daily oil supply passes through the narrow waterway.

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Trump's announcement of the ceasefire was met with skepticism, as Iran's parliament speaker Mohammad Baqer Qalibaf stated that key clauses of a 10-point ceasefire proposal were violated even before US-Iran peace talks were set to start on Friday in Pakistan. Qalibaf added that in such a situation, a bilateral ceasefire or negotiations were unreasonable.

The Strait of Hormuz remains shut, with shipping sources stating that the Iranian navy threatened ships attempting to pass through the strait without Tehran's permission with destruction. Iran had stated that it would halt its attacks if strikes against it stopped and that safe transit through the strait would be possible for two weeks in coordination with Iranian armed forces.

Iran could open the strait in a limited and controlled way on Thursday or Friday ahead of a meeting between US and Iranian officials in Pakistan, a senior Iranian official involved in the talks told Reuters. "Safe passage for ships in the Strait of Hormuz will be a key point in the talks ... Oil is set to remain meaningfully above pre-war levels until there is clear evidence of shipping normalization," said Raymond James analyst Pavel Molchanov.

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Shippers were seeking clarity on the logistics, while refiners inquired about new crude loadings on Wednesday in response to the ceasefire deal. Iran attacked Saudi Arabia's East-West Pipeline just hours after the ceasefire was agreed, hitting its only crude oil export route since hostilities began.

Oil futures pared losses after US government data showed a larger-than-expected build in crude stockpiles. US crude stocks rose by 3.1 million barrels to 464.7 million barrels during the week ended April 3, according to the Energy Information Administration. This was higher than the 701,000-barrel build forecast in a Reuters poll.