Oil prices ease ahead of Trump-Xi talks amid fragile Iran ceasefire

London: Oil prices eased on Wednesday, snapping a three-day rally as investors monitored developments of a fragile Middle East ceasefire and prepared for high-stakes talks between U.S. President Donald Trump and Chinese President Xi Jinping in Beijing. Brent crude futures fell 19 cents, or 0.2 percent, to $107.58 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped 39 cents, or 0.4 percent, to $101.79 as of 0909 GMT. Despite the dip, both benchmarks have remained above the $100 mark since the escalation of the U.S.-Israeli conflict with Iran earlier this year. Market sentiment continues to be driven by geopolitical uncertainty, particularly the ongoing tensions in the Middle East. Analysts say oil prices could remain highly volatile, with any escalation or disruption to supply routes likely to trigger sharp price swings. The Strait of Hormuz, a critical transit point for global oil shipments, remains a key concern after Iran tightened control over the waterway. Losses in oil prices were limited after the International Energy Agency (IEA) warned that global supply may fall short of demand in 2026 due to disruptions caused by the conflict. The agency also reported a significant drawdown in oil inventories in recent months, highlighting the extent of supply constraints. Further tightening of global supplies has been compounded by a drop in Russian oil production. According to the IEA, output declined by about 460,000 barrels per day year-on-year in April, partly due to increased attacks on energy infrastructure. Investor attention is also focused on the upcoming meeting between Trump and Xi, where trade and energy issues are expected to feature prominently. China remains a major buyer of Iranian oil despite U.S. sanctions, adding complexity to discussions. Meanwhile, economic pressures in the United States are mounting. Rising oil prices have contributed to higher inflation, with consumer prices recording their largest annual increase in nearly three years in April. This has strengthened expectations that the Federal Reserve may keep interest rates elevated, potentially dampening energy demand. In the United States, crude inventories have fallen for a fourth consecutive week, according to industry data, further underscoring tight supply conditions. Official government figures on stockpiles are expected later. Despite short-term price fluctuations, analysts suggest oil markets will remain supported by supply constraints and geopolitical risks, with prices likely to stay elevated over the coming months.