This photo shows a view of LyondellBasell refinery near the Houston Ship Channel, part of the Port of Houston, on April 29, 2026.
Ronaldo Schemidt | AFP | Getty Images
Oil prices eased on Wednesday, snapping a three-day rally as investors awaited developments on the fragile Middle East ceasefire and braced for a high-stakes summit in Beijing between U.S. President Donald Trump and China’s Xi Jinping.
Brent crude futures dropped 20 cents to $107.57 a barrel. U.S. West Texas Intermediate futures fell 48 cents to $101.70.
Both benchmarks have largely hovered around or above the $100 per barrel mark since the start of the U.S.-Israeli war on Iran at the end of February after which Tehran effectively shut the Strait of Hormuz.
“The market remains highly reactive to every update from the region, meaning sharp swings are likely to persist. Any further escalation or direct threat to supply flows could quickly revive strong upside momentum in both Brent and WTI,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
Prices pared losses on Wednesday after the International Energy Agency said global oil supply will not meet total demand this year as the war wreaks havoc on Middle East production.
“The latest IEA oil market report just showed the magnitude of the disruption with large oil inventory declines over the last two months,” UBS analyst Giovanni Staunovo said.
The IEA also said Russia’s crude oil production declined by 460,000 barrels per day in April from the same month a year ago to around 8.8 million bpd, as Ukraine ramped up drone attacks on energy targets.
On Tuesday, oil prices rose more than 3%, extending earlier gains as hopes for a lasting U.S.-Iran ceasefire faded. That dimmed prospects for reopening the strait, through which about a fifth of global oil and liquefied natural gas normally flows.
Trump said on Tuesday he did not think he would need China’s help to end the war, even as hopes for a lasting peace deal dwindled and Tehran tightened its grip over the strait.
China is the biggest buyer of Iranian oil despite sanctions pressure from the Trump administration. Trump is scheduled to meet Xi on Thursday and Friday.
“The length of the disruption and the scale of the supply loss – already more than 1 billion barrels – means oil prices are likely to remain above $80 per barrel for the rest of the year,” Eurasia Group said in a client note.
The war with Iran has started to take its toll on the U.S. economy, as higher oil prices lead to more expensive fuels, and economists expect to see second-round effects in the months ahead.
In April, U.S. consumer prices rose sharply for a second straight month, resulting in the largest annual increase in inflation in nearly three years, bolstering expectations that the Federal Reserve would keep interest rates steady for a while.
Elevated interest rates make borrowing more expensive, potentially hurting demand for oil.
As the war continues, last week’s U.S. crude oil inventories fell for a fourth straight week and distillate inventories also declined, according to market sources citing American Petroleum Institute data.
U.S. government data on stockpiles is due later on Wednesday.