Crude oil futures experienced a sharp decline during Wednesday's overnight session, with WTI briefly falling below the $100 per barrel mark. The drop was triggered by reports that the text of a U.S.-Iran agreement had entered its final editing phase, causing prices to plummet by up to 7% intraday. Market volatility has been centered on geopolitical tensions between the U.S. and Iran. Prices began to retreat noticeably from Wednesday afternoon following statements from U.S. officials suggesting a reduced likelihood of renewed conflict. The U.S. President stated that the war could be concluded very swiftly and expressed hope for a dignified resolution. During a meeting, leaders from China and Russia emphasized that the situation in the Middle East Gulf region is at a critical juncture between war and peace, underscoring the urgency of a complete ceasefire, the unacceptability of reigniting hostilities, and the paramount importance of continued negotiations. The U.S. Vice President noted progress in the talks, stating that neither side desires a return to military action. However, the U.S. President also warned that if an agreement cannot be reached, the U.S. may launch another attack within days.
According to the latest developments, Iran has confirmed receiving a proposal from the U.S. in response to a 14-point plan submitted by Iran three days prior. Iran is reviewing the proposal and has not yet issued a reply. Statements from Iranian officials reflect deep distrust. The Iranian Foreign Ministry spokesperson commented on the U.S.-Iran situation, security in the Strait of Hormuz, and U.S. pressure on the evening of the 20th, emphasizing that Iran will continue negotiations with "strong distrust" of the U.S. while firmly safeguarding national interests. Iran is currently exchanging information with the U.S. through Pakistani intermediaries. Tehran's core demands include ending regional conflicts, unfreezing Iranian overseas assets, and halting what it describes as "maritime piracy" against Iranian shipping. The Speaker of Iran's Parliament asserted that the overt and covert actions of adversaries indicate they are seeking a new war, noting that Iran has fully utilized the ceasefire opportunity to optimally rebuild its military capabilities. He claimed the U.S. still hopes for Iran's surrender and mistakenly believes that sustained blockades, economic pressure, increased military pressure, and a new attack could force Iran to meet their excessive demands on the diplomatic front. An Iranian military spokesperson warned that if adversaries make another foolish move and launch a new act of aggression, Iran will open new fronts against them using new means and methods. Simultaneously, he highlighted the Iranian armed forces' control over the Strait of Hormuz, stating that the situation in this strategic waterway cannot return to its previous state.
The latest U.S. Energy Information Administration data shows that commercial crude inventories fell by 7.9 million barrels in the week ending May 15, while Strategic Petroleum Reserve (SPR) stocks decreased by 99.2 million barrels to 374.2 million barrels, marking the largest weekly decline since the week ending August 20, 1982. The Strait of Hormuz remains effectively closed. However, the Islamic Revolutionary Guard Corps Navy reported that over the past 24 hours, 26 vessels, including oil tankers, container ships, and other merchant ships, passed through the Strait of Hormuz in coordination with Iran. Transit through the strait is ongoing, with vessels receiving permits and coordinating accordingly. The U.S. has informed Pakistan that it will not make any concessions to Iran regarding nuclear issues or the Strait of Hormuz. Although the U.S.-Iran standoff over the strait continues, some analysts believe shipping capacity has significantly improved, providing marginal relief to global crude supply chain pressures. Wood Mackenzie stated that in a worst-case scenario of a prolonged shutdown of the Strait of Hormuz, Brent crude could risk soaring to $200 per barrel. The agency noted that over 11 million barrels per day of crude and condensate supply from the Persian Gulf region is currently disrupted.
Despite Wednesday's significant price drop, the prospects for U.S.-Iran negotiations remain highly uncertain. With Iran taking a firm stance on its core demands, which diverge significantly from the U.S. President's requirements, and given the U.S. President's recent statements indicating a preference for resolving the issue without restarting a war, Iran's response in the coming days will be crucial. The sharp decline in oil prices initially priced in the possibility of a breakthrough in the negotiation deadlock. However, if the U.S. President insists on not making concessions to Iran, the likelihood of an agreement appears low, and the final negotiation outcome could involve a dramatic reversal. The crude oil market continues to face a complex situation, with potential for sudden shifts influenced by the U.S. President's contradictory and confusing statements, suggesting that significant price volatility remains likely. Strengthen risk management and participate with caution.
Daily Market Movements: 1. WTI crude oil futures fell by $5.89, or 5.66%, settling at $98.26 per barrel. Brent crude oil futures dropped by $6.26, or 5.63%, closing at $105.02 per barrel. INE crude oil futures declined by 5.24%, with the H1 contract settling at 647 yuan. 2. The U.S. Dollar Index decreased by 0.18% to 99.13. The Hong Kong Exchange USD/CNY rate rose by 0.03% to 6.7969. The U.S. 10-Year Treasury yield increased by 0.47% to 109.25. The Dow Jones Industrial Average gained 1.31%, closing at 50,009.35.
Recent Key News: 1. EIA Report: Commercial crude inventories, excluding strategic reserves, decreased by 7.863 million barrels to 445 million barrels, a 1.74% drop. This compares with an expected decrease of 2.942 million barrels and a previous decline of 4.306 million barrels. Strategic Petroleum Reserve (SPR) stocks fell by 99.20 million barrels to 374.2 million barrels, a 2.58% decrease, marking the largest weekly drop since the week ending August 20, 1982. This represents the eighth consecutive week of declines, following a previous decrease of 86.05 million barrels. Cushing, Oklahoma crude inventories decreased by 1.604 million barrels, compared to a prior drop of 1.702 million barrels. Distillate fuel inventories increased by 0.372 million barrels, against an expected decrease of 1.072 million barrels and a prior increase of 0.190 million barrels. Gasoline inventories fell by 1.548 million barrels, compared to an expected decrease of 2.096 million barrels and a prior decline of 4.084 million barrels. EIA Report: For the week ending May 15, U.S. domestic crude oil production decreased by 8 thousand barrels per day to 13.702 million barrels per day. U.S. crude oil exports increased by 112 thousand barrels per day to 5.604 million barrels per day. Commercial crude oil imports, excluding strategic reserves, were 6.016 million barrels per day, up 115 thousand barrels per day from the previous week. The four-week average supply of U.S. petroleum products was 20.239 million barrels per day, an increase of 3.13% compared to the same period last year.
2. IEA: Global electric vehicle sales are projected to reach 23 million units in 2026, accounting for nearly 30% of total sales. (1) The International Energy Agency (IEA) stated on May 20 that, despite an 8% year-on-year decline in global sales in the first quarter of 2026 (affected by policy changes in China and the U.S.), full-year sales are expected to grow to 23 million units, representing nearly 30% of global car sales. (2) Falling battery prices, improved cost competitiveness, and policy responses to the current energy crisis will further support demand. EV sales are increasing in countries with energy supply concerns or significant fuel price hikes. However, due to lags between orders and deliveries, the full impact of the crisis has not yet been fully realized. (3) Strong growth in other regions: Europe saw nearly 30% growth, the Asia-Pacific region excluding China grew by 80%, and Latin America grew by 75%. With price and policy support, Southeast Asia's market share could rise to 60% by 2035. Even without new policies, the global electric vehicle fleet (excluding two/three-wheelers) could reach 510 million units by 2035, up from the current nearly 80 million.
3. The Iranian Revolutionary Guard Corps Navy announced on Wednesday that a total of 26 vessels, including oil tankers, container ships, and other commercial ships, passed through the Strait of Hormuz in the past 24 hours under coordination. The Revolutionary Guard Corps Navy added that transit through the strait is ongoing, provided that relevant permits have been obtained and coordination with the Guard has been completed. Iran has intensified its control over shipping lanes, prompting the implementation of new navigation rules. Iran's Tasnim News Agency reported that Iran has released video footage of drones targeting oil tankers passing without prior coordination, explicitly stating that violators and concealed tankers have been identified and penalized at the entrance to the Strait of Hormuz. This control measure, combined with multilateral consultation practices for navigation, has formed a new transit model of "bilateral consultation + compliant passage." Although the U.S. continues to blockade vessels entering and leaving Iranian ports, shipping capacity in the strait has significantly improved, providing marginal relief to pressures on the global crude oil supply chain.
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