Oil moved lower early on Thursday following reports Iran is allowing Chinese ships to transit the Strait of Hormuz.
West Texas Intermediate crude oil for June delivery was last seen down US$1.48 to US$99.54 per barrel, while July Brent oil was down US$1.68 to US$103.95.
The drop followed a Reuters report, citing Iranian state media, that Iran is allowing Chinese ships to move through the blocked Strait of Hormuz, and have allowed 30 vessels to move through the Strait "in recent hours".
Iran closed the Strait to most traffic at the Feb. 28 start to the war launched by the United States and Israel, stranding hundreds of ships in the Persian Gulf and blocking 20% of daily oil demand supply by regional nations.
The blockade of the Strait has pushed oil prices up by half since the start of the war. leaving Asian nations scrambling for physical supply and boosting inflation, raising concerns central banks will need to raise interest rates to cut demand. The United States this week reported wholesale and consumer prices surged last month, heightening concerns of higher rates, though the CME FedWatch Tool sees a 97.5% probability the Federal Reserve will leave rates unchanged during the June 17 meeting of its policy committee.
Iran's control of the Strait is a key focus of the summit meeting underway between Chinese President Xi Jinping and U.S. President Trump in Beijing. The Wall Street Journal reported the pair agreed the Strait should remain an international waterway and Iran should not be allowed to extract payments from ships passing through the Strait.