Oil prices seesaw in choppy trade as U.S. says Iran blockade fully implemented

Investing.com -- Oil prices seesawed on Wednesday, but remained well below the $100 a barrel threshold, as investors gauged a U.S. naval blockade on Iran against hopes for more ceasefire talks. 

At 15:20 ET (19:20 GMT), Brent crude futures, the global oil benchmark, were flat at $94.77 a barrel, while West Texas Intermediate crude futures slipped 0.5% to $90.86 a barrel. 

Oil prices were nursing steep losses this week, largely due to markets pricing in optimism around potential renewed negotiations to secure a permanent end to Iran war. Demand forecast cuts by the IEA and the OPEC also weighed on sentiment.

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CENTCOM says Iran blockade fully implemented

U.S. Central Command said in a social media post that a blockade of Iranian ports had been "fully implemented," and that U.S. forces have "completely halted economic trade going into and out of Iran by sea." 

The U.S. began its naval blockade earlier this week, reportedly with the aim of further pressuring Tehran into accepting a ceasefire deal. U.S.-Iran talks in Pakistan ended with no agreement, although experts had suggested that the chances of a deal being forged in such a short period of time was unlikely. 

The blockade stands to further increase shipping disruptions in the Strait of Hormuz, especially if Tehran retaliates against the move with military force. The strait is a key point of focus in the Iran war, with Tehran having effectively shuttered the channel in response to U.S.-Israeli hostilities in late-February.

The narrow waterway supplies roughly 20% of the world’s oil, with several Asia-Pacific countries heavily dependent on flows through the chokepoint.

Reuters on Wednesday reported that Iran could consider allowing ships to sail freely through the Oman side ​of the Strait of Hormuz as part of proposals offered in negotiations with the U.S., citing a source briefed by Tehran.

U.S. Treasury Secretary Scott Bessent told reporters that the blockade will also lead to a pause in China’s buying of Iranian oil. Bessent also added that waivers on Iranian and Russian oil at sea would not be renewed.

Disruptions in the strait caused oil prices to spike to as high as almost $120 a barrels in March, compared to pre-war levels of around $70 a barrel. ANZ analysts estimated at least 10 million barrels per day of supply have been cut off by the conflict.  

"Tight balances alone are sufficient to sustain the price of Brent near or above recent threshold levels. The longer the conflict drags on, the more persistent these price dynamics are likely to be," the analysts said in a note. 

Trump flags more Iran talks, claims war close to over

President Donald Trump has suggested that the U.S. war with Iran may be coming to a conclusion soon.

Speaking to Sky News in the U.K., Trump said it was "very possible" that a permanent ceasefire agreement with Iran could be reached prior to the visit of King Charles later this month. He added that Iran has been "beaten up pretty bad."

Earlier, Trump told Maria Bartiromo of Fox News that the conflict, which began with joint U.S. and Israeli strikes on Iran in late February, is "close to over."

The New York Post also reported that Trump expects temporary U.S.-Iran ceasefire talks to resume in the next two days, following a first round of talks in Pakistan last weekend that failed to produce any results. 

White House Press Secretary Karoline Leavitt on Wednesday told reporters that the U.S. "remain very much engaged" in negotiations and that the conversations were "productive and ongoing."

"We feel good about the prospects of a deal," Leavitt said.

"The geopolitical situation continues to be complicated as Tehran and Washington position for control over the Strait of Hormuz amidst traffic volume through the key waterway that is well below normal. Meanwhile, Iran has threatened to retaliate in response to the U.S. naval blockade of the passage," José Torres, senior economist at Interactive Brokers, said.

"Still, President Trump has attempted to quell anxieties by saying that both sides could begin negotiations again this week and that the conflict will likely culminate soon. However, WTI crude is now up...after sinking to $86.96 last night, its lowest price since March 26, a development that is emblematic of a significant likelihood that energy costs will stay elevated even if a truce is struck," Torres added.

Bessent says gas back to $3 between June and September

The spike in oil prices has begun to show up in U.S. economic data, with consumer and producer inflation reports recently showing a big impact in headline figures. Meanwhile, gasoline prices at U.S. pumps continue to remain elevated, with the national average at $4.108 a gallon, according to AAA.

Bessent on Wednesday, to a question about when gas prices could be expected to fall back to $3, said that it would depend upon the negotiations with Iran. 

Bessent said that gas prices would be back to $3 sooner rather than later, adding that in conversations with his Middle East counterparts he had been told that once the Strait of Hormuz was open again, oil producers can start pumping in one week.

"Sometime between June 20 and September 20, we can have $3 gas again" Bessent said. 

U.S. crude inventories fall for first time in eight weeks

Elsewhere, data from the Energy Information Administration showed that U.S. commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, decreased by 900,000 barrels to 463.8 million barrels in the week ending April 10. This was the first fall in inventories in eight weeks. 

The agency said crude oil inventories were about 1% above the five-year average for this time of the year. 

Total products supplied over the last four-week period, an indicator of U.S. oil demand, averaged 20.6 million barrels per day, representing a 5.6% year-on-year increase. 

Ambar Warrick and Scott Kanowsky contributed to this article