Oil Edges Higher After Sharp Drop; Trump Says Iran Talks Near Endgame

International oil prices rose modestly after a steep selloff.

Bloomberg reported on May 20 that West Texas Intermediate traded near $99 a barrel after tumbling more than 5% a day earlier. Brent closed near $105 a barrel.

The sharp drop had been driven by comments from President Donald Trump that negotiations with Iran were nearing their final stage. Trump told reporters the talks were in their last phase and that a deal could be reached, though other measures remained possible if it was not.

Traders are focused on whether a US-Iran agreement could help restore oil shipments through the Strait of Hormuz. Global crude prices have climbed more than 40% since the war in the Middle East began.

Market anxiety remains elevated. Joe DeLaura, an energy strategist at Rabobank, said disruptions in the physical oil market would persist for a considerable period even if an immediate ceasefire were reached. Crude from the Persian Gulf can take as long as 55 days to reach its destination.

Sultan Al Jaber, chief executive officer of Abu Dhabi National Oil Company, said any closure of the Strait of Hormuz would mark the most severe supply disruption in history. He added that a full normalization of Middle East oil supplies could be delayed until after 2027.

US crude inventories fell by about 7.9 million barrels last week. Increased movement by very large crude carriers attempting to pass through the Strait of Hormuz has also helped ease the market's risk premium.

Iran's semi-official Tasnim news agency reported that the Iranian government is reviewing a new US proposal for negotiations. Iran has warned that it could expand retaliation beyond the Middle East if the US or Israel carries out additional attacks.