Global oil prices dropped sharply on Monday after US President Donald Trump said renewed military action against Iran was highly unlikely while peace talks continue, even as reports emerged of ships being hit near the Strait of Hormuz.
Brent crude futures fell $5.05, or 5.2%, to $93.27 a barrel by 1427 GMT, the lowest level since early September, after touching $93.21 earlier in the session. US West Texas Intermediate lost $4.12, or 4.5%, to $86.71.
Trump made the remarks on Sunday, as both Washington and Tehran reported attacks on vessels in or near the strait.
The president had hinted at resuming strikes on Iran after last week’s US midterm elections, but there has been no sign of a large-scale US military operation. Iran has warned it would hit US and Israeli targets in response.
Brent plunged 16% last week to a two-month low of $93.22, its steepest weekly decline since the start of the COVID-19 pandemic.
Saxo Bank analyst Ole Hansen said oil was trading lower on hopes of a US-Iran peace deal rather than on concrete progress, adding that Trump’s latest comments had increased pressure on prices.
Physical market weakness is also weighing on crude. UBS analyst Giovanni Staunovo pointed to still-elevated flows out of the Middle East.
Morgan Stanley noted in a report on Monday that Dated Brent, used to price cargoes worldwide, has slipped to a discount to the nearby Brent futures contract.
Tim Waterer, chief analyst at KCM Trade, described Trump’s comments as more measured, but said the market is still waiting to see whether the midterms have produced a lasting shift in his approach to the conflict or only a temporary change in tone.
Some analysts say the global oil market is heading back toward excess supply as high prices curb demand. JP Morgan estimated a global surplus of 1.4 million barrels per day in October. (Reuters)
