The June Brent contract dropped 4.35% to $99.45 per barrel by 7:05 am GMT, while May U.S. WTI crude slipped 3.99% to $97.34 per barrel.
Prices rose earlier on Wednesday but turned lower as uncertainty over the Middle East conflict prompted investors to lock in gains.
“The dip is likely due to a lull during Asian hours with profit taking amid signals from the U.S. that the war may come to a conclusion in the near term,” said Emril Jamil, senior analyst at LSEG.
Brent futures for June delivery settled down more than $3 on Tuesday following unconfirmed media reports that Iran’s president was ready to end the war.
President Donald Trump told reporters on Tuesday that the U.S. could end the military campaign within two to three weeks and that Iran does not have to make a deal to end the conflict, his clearest declaration yet that he wants to wind down the month-long war.
Still, even if the conflict ends, infrastructure damage is likely to keep supplies tight, analysts say. Oil prices will depend on how quickly supply chains normalize afterwards, said Priyanka Sachdeva, senior market analyst at Phillip Nova.
“Even if it starts to de-escalate, the flow of tankers won’t resume right away … shipping costs and insurance, tanker movement will take time to return to normal,” Sachdeva said, adding that the actual damage to oil infrastructure could only be assessed afterwards.
Trump has indicated he could end the war before reopening the Strait of Hormuz, a key route through which 20% of global oil and liquefied natural gas trade flows, according to a Wall Street Journal report.
“Even with diplomatic channels reportedly still active and intermittent comments from the U.S. administration predicting a short end to the conflict, the combination of limited tangible diplomatic progress, continued maritime attacks and explicit threats against energy assets keeps supply risks skewed to the upside,” LSEG analysts said in a note.
OPEC oil output dropped 7.3 million barrels per day in March compared with the previous month, a Reuters survey showed on Tuesday, illustrating the impact of forced export cuts because of the closure of the strait.
Meanwhile, U.S. crude oil output fell by the most in two years in January following a severe winter storm that knocked production offline in large swathes of the country, data from the Energy Information Administration showed on Tuesday.
