The fragile cease fire agreement reached between the U.S. and Iran sent crude oil prices tumbling below $100 a barrel on Wednesday, giving traders and investors increased hopes that oil and gas will soon again be flowing through the Strait of Hormuz.
Part of the deal included a reopening of the Strait by Iran but the country apparently still maintained control on Wednesday. A fifth of global oil and liquefied natural gas is shipped through the narrow body of water.
Adding to the pressure of falling oil prices was a report that crude oil inventories in the United States increased by 3.1 million barrels during the week ending April 3, according to new data from the U.S. Energy Information Administration (EIA) released on Wednesday. The increase brings commercial stockpiles to 464.7 million barrels according to government data, which is 2% above the five-year average for this time of year.
West Texas Intermediate crude fell at least 16% on the day amounting to a drop of $18.54 a barrel before closing at $94.41 a barrel on the New York Mercantile Exchange.
Brent crude fell more than 13% or $14.52 a barrel to finish at $94.75 a barrel.
Both were still above pre-war price levels. The fall in oil prices followed President Trump’s Tuesday night announcement of a two-week long cease fire.
Iran proclaimed a victory after saying it would stop counterattacks and provide safe passage through the Strait if the attacks against it stopped. But Wednesday afternoon, Iran’s Parliament speaker claimed three key clauses of a 10-point proposal were violated already as the two countries prepared to begin negotiations on Friday.
Natural gas prices also fell and closed at $2.731 MMBtu following a drop of $0.139 or 4.84%.
Oklahoma energy stocks experienced losses on Wednesday, some falling as much as 6% for the day. USA Rare Earth was one of the few with gains and it soared nearly 15%.