Trump's remark crashes the oil market! Brent crude drops over 7% intraday, even a record plunge in U.S. inventories can't stop the fall.

On Wednesday, June 20th Eastern Time, the international crude oil futures market was "pierced" by a single remark from U.S. President Trump.

Early in the U.S. stock market session on Wednesday, data released by the U.S. Energy Information Administration (EIA), under the Department of Energy, showed that total U.S. EIA crude oil inventories fell a record 17.8 million barrels last week, far exceeding market expectations. Combined with U.S. crude oil exports rising to historic highs, this temporarily sparked market concerns about further tightening global supply.

After the EIA data release, international crude oil, which had dropped more than 4% earlier, trimmed some losses in the short term. But subsequent reports revealed that Trump said U.S.-Iran negotiations were in the "final stage", causing market risk premium to quickly unwind and crude oil prices to plummet sharply.

When the U.S. stock market hit a daily low, the July contract for U.S. WTI crude oil fell to $97, dropping nearly 6.9% intraday; Brent crude oil fell to $103.24, dropping over 7.2% intraday, marking the biggest single-day drop in nearly two weeks.

The sharp reversal in market sentiment highlights that the current logic of oil trading is completely dictated by the Middle East situation: Any news about the restoration of the Hormuz Strait or progress in Iran negotiations is enough to instantly reverse the previous upward trend driven by supply panic.

Record inventory collapse should have been a super bullish factor

From a fundamental perspective, EIA data is actually extremely bullish.

The data shows that last week, total U.S. crude oil inventories, including Strategic Petroleum Reserve (SPR), fell by 17.8 million barrels, with about 9.9 million barrels coming from SPR releases alone; commercial crude oil inventories also decreased by 7.9 million barrels week-on-week, marking four consecutive weeks of decline, with the decrease far exceeding analysts' expectations of about 2.9 million barrels. Meanwhile, U.S. crude oil exports rose to a record high of 5.6 million barrels per day.

What makes the market even more nervous is that in Cushing, Oklahoma, the WTI delivery point, inventories have declined for a fourth consecutive week, further approaching the so-called "Tank bottoms" level.

Wall Street generally believes this means the U.S. is gradually losing its ability to serve as the "last buffer" for the global crude oil market.

Many traders previously bet that if shipping through the Hormuz Strait remains constrained and U.S. inventories continue to fall rapidly, the global crude oil market could soon enter an "extreme shortage" phase.

Therefore, at the moment EIA data was released, oil prices briefly narrowed losses, with Brent crude oil rising above $107.40, dropping less than 3.5% intraday, and U.S. oil rebounding above $100.90, dropping less than 3.1% intraday.

But what really determines market direction is Trump's remarks

However, just a few minutes later, market trading logic was completely rewritten.

On Wednesday, Trump stated that U.S. negotiations with Iran have entered the "final stage" and reiterated that the war will "end very quickly." Meanwhile, media reported that some oil tankers have begun to resume passage through the Hormuz Strait.

Reports said that the Iranian Revolutionary Guard Navy claimed on Wednesday that in the past 24 hours, 26 vessels, including oil tankers, container ships, and other merchant ships, passed through the Hormuz Strait in coordination with Iran. Additionally, according to Wednesday morning's Xinhua News Agency report, British shipping media cited tracking data on social media Tuesday, stating that between May 11 and 17, at least 54 ships crossed the Hormuz Strait, compared to only 25 the previous week.

These shipping reports from the Hormuz Strait directly hit the core logic that previously supported the surge in oil prices—the prolonged closure of Hormuz.

Over the past few weeks, the market's greatest concern was that the Iran conflict could lead to long-term disruption of the Hormuz Strait. The strait handles about one-fifth of global crude oil shipments; if it remains closed, the global energy market would face the most severe supply shock in decades.

Now, as the market starts to reprice the possibility of "easing conflict" or even "restoration of passage" through the strait, the previously inflated geopolitical risk premiums are quickly unwound.

Phil Flynn of Price Futures Group said the market is trading on expectations that "peace negotiations reduce the odds of further U.S. military action."

Wall Street: This is more like "bubble squeezing" than a trend reversal

Despite the sharp fall in oil prices during Wednesday's session, most Wall Street institutions have not fully turned bearish.

Many institutions believe that this round of declines is more like a quick squeeze of the prior "war premium" rather than the true end of the supply crisis.

Media cited analysts saying that global crude oil supply remains very tight, the restoration of shipping via the Hormuz Strait is still quite limited, and the number of tankers passing through is far below pre-conflict levels.

Wood Mackenzie even warned that if the Hormuz Strait is once again closed on a large scale, oil prices could surge towards $200.

Citi believes that given global inventories continue to decline, U.S. exports stay high, and the summer peak demand season approaches, Brent crude oil may still retest $120.

Media also pointed out that although diplomatic news has softened market sentiment, the rapid decline in oil inventories, the unstable Middle East situation, and insufficient global spare capacity mean the oil market's vulnerability has not been resolved.

Key for the future: Can Hormuz truly be restored?

The current market is actually violently swinging between two completely opposite scenarios:

On one hand, if U.S.-Iran negotiations make substantial progress and shipping through Hormuz gradually resumes, the surge in oil prices driven by "supply cut panic" may continue to retreat;

On the other hand, as long as the Middle East situation worsens again and oil tanker shipping is interrupted once more, with global inventories continuing to drop, oil prices could easily re-enter a squeeze mode.

In other words, today’s crude oil market is no longer just a supply and demand market, but a highly politicized, emotional "geopolitical risk market."

And this Wednesday’s plunge further illustrates: The current key factor determining oil price direction may no longer be inventory data itself, but every word spoken between the White House and Tehran.

Risk warnings and disclaimerThe market has risks, and investment should be prudent. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are appropriate for their particular situation. Investment based on this, at your own risk.