EMEA crude futures extended declines in after-hours trading on Wednesday amid reports that the US and Iran are nearing a framework deal to end the Middle East conflict, with President Trump saying "Great Progress" has been made on a final agreement.
Brent crude futures dropped by 6.85% to $110.38 per barrel, while Murban oil futures were down 7.63% to $97.88/bbl.
Soojin Kim, research analyst at MUFG, said the naval blockade on Iranian ports remains in place, "keeping supply disruptions elevated."
"The US also signalled a reduced likelihood of renewed military escalation, with officials confirming that the ceasefire remains intact despite recent attacks in the Gulf region," Kim said.
On Wednesday, President Trump said that the US would pause its effort to escort ships through the Hormuz Strait, signalling progress toward a final Iran deal.
US officials reportedly believe Washington is nearing a one-page, 14-point memorandum of understanding to end the war and establish a framework for more detailed nuclear talks.
The Trump administration expects Iran to respond to several key points over the next 48 hours, but nothing has been agreed to yet.
"Assuming Iran agrees to give what has been agreed to, which is, perhaps, a big assumption, the already legendary Epic Fury will be at an end, and the highly effective blockade will allow the Hormuz Strait to be open to all, including Iran," Trump said in a post on Truth Social.
Pakistan, the mediator in the US-Iran talks, said the two sides were closing in on an agreement on a one-page memorandum of understanding, according to media reports. Iran, meanwhile, is reviewing a new US proposal, and it will convey its response soon through Pakistan.
Rystad analysts said reports of a potential deal have gained credibility, with Pakistan's foreign ministry saying it expects a resolution "very soon," while the US anticipates a response from Iran within 48 hours.
"A deal announcement would move futures further immediately, in fact even the potential of a deal is already triggering a decline in oil prices. However, the physical market does not run on political timelines," said Paola Rodriguez-Masiu, Rystad's chief oil analyst.
Global energy supply losses from halted vessel traffic via the Strait since the outbreak of the Middle East conflict have roiled markets and driven up prices. On Tuesday, Trump said that the US would temporarily halt "Project Freedom," citing progress in negotiations with Iran.
Going forward, Kim said that tighter US crude inventories and ongoing Middle East supply risks continue to support prices despite improving sentiment around diplomacy.
US exports of total petroleum products hit a record high of 8.2 million barrels per day in the week ending May 1, the Energy Information Administration said. The weekly figure is up from 7.7 mmb/d a week ago, according to EIA weekly data.