Oil prices faltered on Thursday, with investors on the lookout for any announcements about the Iran war from a high-stakes summit between the leaders of the U.S. and China.

By 08:20 ET (12:20 GMT), Brent crude futures, the global oil benchmark, had fallen by 1.6% to $104.00 a barrel. U.S. West Texas Intermediate crude futures, meanwhile, dipped by 1.4% to $99.63 a barrel. Both contracts slipped more than 1% in the previous session but were still set for sharp weekly gains.

U.S. President Donald Trump and Chinese counterpart Xi Jinping have ended their first round of talks during a two-day summit, with Xi telling state media that negotiations around trade in particular were making progress. However, he flagged that pushback from the U.S. over Taiwan could sour relations.

Markets were especially keen for any update on possible discussions around the Iran war. Some analysts have suggested that Trump may attempt to persuade China, a major importer of Iranian oil, to act as a guarantor of a lasting peace agreement, although it remains uncertain whether Beijing would want to play such a role.

While the leaders and top business executives gather in China, the world’s economy faces a murky outlook due to the continued closure of the Strait of Hormuz, a vital waterway off Iran’s southern coast through which roughly a fifth of global oil flows. Iran and the U.S. have instituted twin blockades of the conduit, bringing tanker traffic to a virtual standstill.

A subsequent energy shock has driven oil prices well above pre-war levels of roughly $70 a barrel and, in turn, fueled fears over a wave of surging inflation hitting countries around the world.

Earlier this week, the International Energy Agency and Organization of the Petroleum Exporting Countries slashed their respective forecasts for oil demand this year, while global oil supply is estimated to have fallen by 1.8 million barrels per day in April, analysts at ING said. Since February, supply losses have totaled 12.8 million bpd, weighing on crude inventory levels.

“Some hope that China could exert pressure on Iran to reach a deal with the U.S., to end the war and lead to a resumption of energy flows through the Strait of Hormuz,” the ING analysts said. However, they flagged that traders “could be pinning too much hope” on the talks in China yielding positive results in Iran.

U.S. crude inventories also lent support to prices after government data showed stockpiles fell by 4.3 million barrels last week, more than the 2.0 million barrels decline analysts had expected, pointing to resilient fuel demand despite elevated prices.

Gasoline inventories still fell 4.1 million barrels over the week, while distillate stocks rose by just 190,000 barrels.
Source: Investing.com