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US Oil Update: Futures Drop as Trump Says Iran Peace Talks in 'Final Stages'

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Crude oil prices tumbled in after-hours trading on Wednesday as the market weighed President Trump's comments on Middle East peace negotiations between the US and Iran against a larger-than-expected drawdown in US crude inventories.

Front-month West Texas Intermediate crude futures dropped by 6.12% to $97.85 per barrel, while Brent futures plunged by 5.94% to $104.61/bbl.

US crude oil inventories decreased by 7.9 million barrels to 445 mmbbls in the week ended May 15, the Energy Information Administration said in its weekly report on Wednesday.

Crude oil input to refineries decreased by 80,000 barrels per day from the previous week to average about 16.3 mmb/d in the week ending May 15, while crude oil production dropped by 8,000 b/d to 13.7 mmb/d.

On Wednesday, Trump said that negotiations with Iran were in the final stages, while warning of further attacks unless Iran agrees to a deal.

Though a fragile ceasefire was reached in April, talks to end the conflict have shown little progress so far. Earlier this week, Trump said he came close to ordering more attacks but held off to allow more time for negotiations.

Saxo Bank strategists said that Trump warned that US strikes on Iran could resume within days if peace talks fail, adding to market volatility.

"We're in the final stages of Iran. We'll see what happens. Either have a deal, or we're going to do some things that are a little bit nasty, but hopefully that won't happen," Trump told reporters on Wednesday.

Meanwhile, Iran's Revolutionary Guard threatened to extend the Middle East conflict "beyond the region" if the US and Israel resume attacks against Tehran.

"If aggression against Iran is repeated, the regional war that had been promised will this time be drawn beyond the region, and our crushing blows will lay you in black dust in places you cannot imagine," the IRGC said on Wednesday.

The ongoing Middle East conflict has effectively closed the Strait of Hormuz, a critical waterway that handles about 20% of global oil and liquefied natural gas supplies, creating the world's largest oil supply disruption, according to the International Energy Agency.

The US Navy has redirected 90 Iran-linked commercial vessels and disabled four others since imposing the blockade on April 13, the US Central Command said in a social media post on Wednesday.

Kpler said the US blockade of Iranian ports is emerging as a central pressure point in the Trump administration's Iran strategy, with no Iranian crude tanker crossing the designated blockade line since April 13.

Crude loadings have fallen to about 640,000 barrels per day from about 2.1 million b/d previously, according to the data.

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