Oil prices edged lower on Wednesday, snapping a three-session winning streak, as investors weighed fragile ceasefire dynamics in the Iran war and awaited US President Donald Trump’s high-stakes meeting with Chinese President Xi Jinping.
Brent crude futures fell 82 cents, or 0.76%, to $106.95 a barrel at 0051 GMT, while US West Texas Intermediate dropped 66 cents, or 0.65%, to $101.52.
Both benchmarks remain elevated, hovering around or above $100 since US and Israeli strikes on Iran escalated in late February and Tehran effectively shut the Strait of Hormuz.
Oil prices rose by over 3% on Tuesday, extending earlier gains as hopes for the lasting US-Iran ceasefire faded, dimming prospects of reopening the strait, through which about a fifth of global oil and liquefied natural gas normally flows.
Trump said on Tuesday he does not think he will need China's help to end the war with Iran, even as hopes for a lasting peace deal dwindled and Tehran tightened its grip over the strait.
China is the biggest buyer of Iranian oil despite pressure from the Trump administration. Trump meets his Chinese counterpart, Xi, in Beijing on Thursday and Friday.
"The length of the disruption and the scale of the supply loss - already more than 1 billion barrels - means oil prices are likely to remain above $80 per barrel for the rest of the year," Eurasia Group said in a client note.
The war with Iran has started to take its toll on the US economy, the world's biggest, as higher oil prices lead to more expensive fuels, and economists expect to see second-round effects in the months ahead.
In April, US consumer prices rose sharply for a second straight month, resulting in the largest annual increase in inflation in nearly three years, bolstering expectations that the Federal Reserve would keep interest rates flat for a while.
"The marked increase in inflation across advanced economies has yet to cause real spending to contract, but the widespread decline in consumer sentiment and hiring intentions points to worse to come," Capital Economics said in a client note.
Elevated interest rates make borrowing more expensive, potentially denting oil demand.
As the Iran war continues, US crude oil inventories fell for a fourth straight week last week, and distillate inventories also declined, according to market sources citing American Petroleum Institute data.
Official inventory data from the US Energy Information Administration, the statistical arm of the US Department of Energy, is due at 10:30 a.m. ET (1430 GMT) on Wednesday, with a Reuters poll also predicting a decline in stockpiles.
