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International benchmark Brent crude dropped 1.33% to trade at $110.61 per barrel, while US West Texas Intermediate futures (WTI) fell 0.91% to $103.43 per barrel as investors digested the latest comments from Donald Trump.
The US President said he was postponing a planned attack on Iran scheduled for Tuesday at the request of Gulf leaders amid “serious negotiations” with Tehran, easing crude supply concerns among market watchers.
Trump’s sudden announcement on social media on Monday came after Iran said it had responded to a new US proposal aimed at ending the war.
‘Oil inventories depleting rapidly’
The latest update comes after Fatih Birol, the head of the International Energy Agency (IEA), told reporters on Monday at the Group of Seven finance leaders meeting in Paris that commercial oil inventories are depleting rapidly and the world only has a few weeks’ worth of oil reserves left due to the Strait of Hormuz closure.
According to preliminary IEA data, global oil stockpiles fell by 129 million barrels in March and by a further 117 million barrels in April following US and Israeli strikes on Iran and the subsequent disruption to Gulf exports.
The sharpest declines were recorded in OECD countries, where on-land inventories dropped by 146 million barrels. Visible stocks in non-OECD economies fell by 24 million barrels.
The agency said cumulative crude supply losses from Gulf producers have now exceeded one billion barrels, with more than 14 million barrels a day unable to leave the region.
The IEA said demand could begin to recover later in the year if an agreement is reached to gradually restore flows through the Strait of Hormuz from the third quarter onwards.
“With global oil inventories already drawing at a record clip, further price volatility appears likely ahead of the peak summer demand period,” the IEA added in its recent report.