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Summary

Trump confirmed that the US Navy will continue its blockade of Iranian ports. The Strait of Hormuz normally carries shipments equivalent to a fifth of the world's oil and natural gas supplies, and has been nearly closed since the start of the US-Israeli war on Iran on February 28.

Oil prices continued to fall to $97 per barrel for Brent crude, while US crude fell to $89.66 on Wednesday amid renewed hopes that the United States and Iran will reach a peace agreement to end the war in the Middle East.

Trump said unexpectedly on Tuesday that he would temporarily stop the process of escorting ships through the Strait of Hormuz, indicating progress toward a comprehensive agreement with Iran, without providing details. There has been no reaction from Tehran yet, as Trump spoke very early in the morning Iran time.

However, Trump said the US Navy will continue its blockade of Iranian ports. The Strait of Hormuz normally carries shipments equivalent to a fifth of the world's oil and natural gas supplies, and has been nearly closed since the start of the US-Israeli war on Iran on February 28.

The loss of supplies in the global market led to higher prices, with Brent crude trading last week at its highest level since March 2022.

Suspension of 'Project Freedom'

Trump wrote on social media, 'We have mutually agreed that, while the blockade will remain in full force and effect, "Project Freedom" will be suspended... for a short period to see whether the agreement can be finalized and signed.'

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Trump's announcement came just hours after US Secretary of State Marco Rubio briefed reporters on the efforts, announced Sunday, to escort stranded tankers through the strait.

The US military announced on Monday that it destroyed several small Iranian boats, as well as cruise missiles and drones, while directing two ships out through the strait.

The closure of Hormuz led to a decline in global inventories, as refineries try to compensate for the shortage.

Meanwhile, market sources said on Tuesday, citing American Petroleum Institute figures, that US crude oil inventories fell for the third consecutive week, and gasoline and distillate inventories also declined.

The sources said crude oil inventories fell by 8.1 million barrels in the week ending May 1. They added that gasoline stocks fell by 6.1 million barrels, and distillate stocks dropped by 4.6 million barrels compared to the previous week.

Saudi Arabia cuts price

In a parallel context, Saudi Aramco announced that Saudi Arabia set the official selling price for Arab Light crude for June for Asian buyers at a premium of $15.50 per barrel over the Oman/Dubai average, down from the previous month.

The official selling price premium for the previous month was $19.50 per barrel.

This reduction is broadly in line with a Reuters survey of industry sources last month, which indicated that Saudi Arabia might cut its official selling price for June from record levels for Asian buyers, amid falling spot market premiums and slowing demand, after weeks of supply disruptions due to the US-Israeli war on Iran.

Aramco set the official selling price for Arab Light crude for Northwest European buyers at a premium of $25.85 over Brent crude on the Intercontinental Exchange, down $2 per barrel, and kept its price for North American customers unchanged at a premium of $14.60 over the Argus Sour Crude Index.

Separately, two Saudi crude oil buyers said Saudi Aramco asked buyers to submit their nominations for crude oil cargoes for June by today, including planned volumes from both the usual export port of Ras Tanura inside the Strait of Hormuz and the Yanbu port on the Red Sea, in anticipation of continued closure of the strait.

The company uses the Yanbu port on the Red Sea to export Arab Light crude, after the war restricted navigation.

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More on: Oil prices, United States, Iran, Strait of Hormuz, Donald Trump, Project Freedom