Oil prices slide as U.S.-Iran war ceasefire under discussion

Oil prices fell Monday as mediators sought to broker a ceasefire between the U.S. and Iran.

The U.S. West Texas Intermediate contract for May dropped about 1% to $110.45 per barrel by 8:19 a.m. ET. International benchmark Brent crude prices were little changed at $108.76 per barrel.

The U.S., Iran and regional mediators are discussing a possible 45-day ceasefire that could lead to a permanent end of the war, four sources with knowledge of the talks told Axios.

President Donald Trump has given Iran until Tuesday to open the Strait of Hormuz or face attacks on its power plants and bridges. Trump warned Sunday in an expletive-filled social media post that Iran would be "living in Hell" if they do not open the Strait.

Trump subsequently posted "Tuesday, 8:00 P.M. Eastern Time!" without further explanation.

Iran has effectively kept the Strait closed through attacks on oil tankers. The sea route connects the Persian Gulf to world markets. About 20% of global supplies passed through the Strait before the war.

The closure of the Strait has triggered the largest oil supply disruption in history. Crude, jet fuel, diesel, and gasoline prices have surged since the war started.

Trump said in a national address last Wednesday that the war would continue for two or three weeks.

Nearly 1 billion barrels will be lost by the end of the month, comprising up to 600 million barrels of crude oil and roughly 350 million barrels of refined products, according to TD Securities.

"With the conflict now expected to last at least into deep April, the barrel math becomes increasingly grim," said Ryan McKay, senior commodity strategist at TD Securities, in a Thursday note to clients.

Rapidan Energy sees a total net loss of 630 million barrels of oil and products by the end of June, when accounting for redirected flows through pipelines, emergency stockpile releases and inventory drawdowns.

The eight members of OPEC+ on Sunday agreed to increase production by 206,000 barrels per day in May, though it is unclear how the oil will reach the global market with the Strait still closed.

Kuwait Petroleum Corporation said Sunday that several of its operational facilities were attacked by drones, resulting in significant damage.

OPEC+ warned that repairing energy infrastructure damaged by Iranian attacks "is both costly and takes a long time, thereby affecting overall supply availability." 

The eight members of OPEC+ are Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria and Oman.

— Anniek Bao contributed to this report.