Oil declines after the extension of the ceasefire

Oil prices fell on Wednesday after rising by about a dollar in early trading in Asia, as investors evaluated the prospects for peace talks between the United States and Iran following Washington’s extension of the ceasefire.

Brent crude futures fell 21 cents, or 0.2 percent, to $98.27 a barrel by 0039 GMT, after touching $99.38 earlier in the session. US West Texas Intermediate crude futures fell 28 cents, or 0.3 percent, to $89.39, after rising to $90.71.

The two benchmarks rose by about three percent yesterday, Tuesday.

US President Donald Trump said that he would extend the ceasefire with Iran indefinitely, just hours before its end, to allow the continuation of talks aimed at ending a war that has claimed the lives of thousands and ravaged the global economy.

Trump’s announcement appeared unilateral, and it was not immediately clear whether Iran, or Washington’s ally, Israel, would agree to extend the ceasefire that began two weeks ago.

“With the outcome of the talks still unclear and the Strait of Hormuz closed, the market lacks a clear direction,” said Hiroyuki Kikukawa, chief analyst at Nissan Securities Investments.

“Unless fighting resumes, prices are likely to remain close to current levels for the time being,” he added.

Trump also said that the US Navy’s blockade of Iran’s ports and coasts will continue, which Tehran’s leaders described as an act of war.

There has been no comment yet from senior Iranian leaders, but the Tasnim News Agency, affiliated with the Revolutionary Guard, said that Tehran did not request an extension of the ceasefire and repeated its threats to break the American blockade by force. Navigation traffic through the Strait of Hormuz, through which about 20 percent of global oil and liquefied natural gas supplies usually pass, remained largely halted yesterday, Tuesday, as shipping data indicated that only three ships had crossed the waterway during the previous 24 hours.

The Israeli army said that the Hezbollah group fired missiles at its forces in southern Lebanon, accusing the Iranian-backed group of violating the ceasefire ahead of US-brokered talks between Israel and Lebanon this week. Hezbollah said it fired missiles at Israel in response to ceasefire violations.

In Europe, Ukrainian President Volodymyr Zelensky said that the Druzhba oil pipeline, which transports Russian oil to the continent, is ready to resume work. But three sources in the sector said that Russia is preparing to stop oil exports from Kazakhstan to Germany via the pipeline, starting from the first of May.

The US Energy Information Administration will publish inventory data later on Wednesday.

Market sources, citing figures from the American Petroleum Institute, said on Tuesday that US crude oil inventories fell by 4.5 million barrels last week after rising for three weeks, and gasoline and distillate inventories also declined.

Analysts’ expectations indicated a decline in crude oil inventories by 1.2 million barrels in the week ending April 17.