- Brent crude fell 1.39% to $106.27, snapping a three-day rally on ceasefire uncertainty.
- EIA expects the Strait of Hormuz to stay closed through late May, shrinking global supply by 2.6 million bpd.
- Trump-Xi summit progress could ease oil prices, while renewed Hormuz tensions may push Brent toward $120.
Oil prices fell on Wednesday, breaking a three-day rally as investors took stock of a fragile Middle East ceasefire and positioned cautiously ahead of the Trump-Xi summit in Beijing. Brent crude futures declined 1.39% to $106.27 per barrel, while US West Texas Intermediate fell 1.53% to $100.62.
The Hormuz Problem Has Not Gone Away
The day-to-day price move masks a more serious structural problem. Iran’s Kharg Island shipments, which handle a significant share of the country’s oil exports, have been halted for the longest continuous stretch since the war began. Saudi Aramco has warned of critically low fuel stocks.
The US Energy Information Administration (EIA) said on Tuesday it now expects the Strait to remain effectively closed through late May. The EIA estimates global oil stockpiles could shrink by 2.6 million barrels per day this year under current conditions, with Brent prices averaging around $106 per barrel through May and June.
China’s commodity import data is already reflecting the disruption. Oil imports are sliding while metals are rising, a pattern consistent with supply shock asymmetry where physical tightness in one market forces substitution across others. Hedge funds are rotating into biofuels, including corn and soybeans, as the war forces traders to recalculate alternative fuel economics.
Two Scenarios That Move Oil Sharply
Analysts are watching specific catalysts that could flip the current range dramatically in either direction.
A breakthrough at the Trump-Xi summit on May 14 and 15 in Beijing, where discussions are expected to cover the Iran conflict, trade tensions, tariffs, and energy security, could trigger a swift move lower in oil prices if it signals genuine progress toward reopening the Strait.
Conversely, any renewed closure or escalation around the Strait of Hormuz could rapidly push Brent toward $120 as supply fears intensify.
Analysts assign a 60/40 probability of Brent remaining within the $105–$115 range through June unless a complete ceasefire materializes. The front-month futures contracts are pricing in peace. The longer-dated term structure is signaling physical tightness that the spot price has not fully reflected yet.
What the Trump-Xi Meeting Could Mean for Energy
The Beijing summit is the most-watched near-term event for oil markets. Beyond trade and tariffs, energy security is expected to feature prominently given China’s exposure to Hormuz disruption and the US interest in stabilizing oil prices while inflation remains elevated.
Any signal from the summit that the US and China are coordinating on Middle East pressure could reduce the geopolitical risk premium in oil. Any sign of new tensions between Washington and Beijing would compound existing supply concerns and push prices higher.
Related: Dollar Hits One-Week High on Inflation, Iran Tensions, Trump-Xi Talks
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