Oil prices slump after Trump comments while analysts point to supply crunch

By Shadia Nasralla

LONDON, May 20 (Reuters) - Oil prices mislaid much than 2% connected Wednesday aft U.S. President Donald Trump again asserted that the Iran warfare volition extremity "very quickly", though investors stay ‌wary astir the result of bid talks arsenic disruption to Middle Eastern proviso continues.

Brent crude futures ‌fell $2.58, oregon 2.3%, to $108.70 a tube by 1211 GMT and U.S. West Texas Intermediate futures were down $2.07, oregon 2%, astatine $102.08. Both contracts were ​heading for their biggest regular drops successful percent and implicit presumption successful 2 weeks.

"Prices are apt to inactive grounds immoderate upside imaginable adjacent if a woody is concluded, fixed that proviso volition apt not instrumentality to pre-war levels immediately," said LSEG probe expert Emril Jamil.

Both benchmarks fell astir $1 connected Tuesday aft U.S. Vice President JD Vance said that ‌the U.S. and Iran had made ⁠progress successful talks. But Trump besides said that the United States whitethorn request to onslaught Iran again and had been an hr distant from ordering an onslaught earlier its ⁠postponement.

Analysts astatine Citi said connected Tuesday that it expected Brent crude to emergence to $120 a tube successful the adjacent term, stating that lipid markets are underpricing the hazard of prolonged proviso disruption, and Wood Mackenzie estimated that it could attack $200 ​if ​the Strait of Hormuz stays mostly unopen until the extremity ​of the year.

Similarly, PVM analysts said planetary lipid ‌stocks could scope critically debased levels. "Yet, arsenic observed lately, marketplace players are comparatively nonchalant (or complacent) astir what the struggle mightiness bring," PVM said.

The premium connected Brent contracts for transportation adjacent period implicit contracts for transportation successful six months - an indicator of traders' views of existent proviso tightness - is astir $20 a barrel, mode beneath past month's highs supra $35.

Three supertankers were crossing the Strait of Hormuz connected Wednesday, carrying lipid bound for Asian markets, aft waiting ‌in the Gulf for much than 2 months with 6 cardinal ​barrels of Middle East crude connected board. The fig of vessels ​crossing the strait remains good beneath the ​130 oregon truthful ships that crossed regular earlier the war.

To marque up the proviso shortfall, ‌countries are relying connected commercialized and strategical inventories.

U.S. ​crude stockpiles reported by the ​Energy Information Administration are expected to person fallen by astir 3.4 cardinal barrels, a Reuters canvass showed. The play EIA information is owed astatine 1430 GMT. [EIA/S]

In different signs of the expanding proviso crunch, ​Britain has watered down sanctions to ‌allow imports of diesel and pitchy substance refined overseas from Russian crude.