Oil prices fell on Monday after US President Donald Trump downplayed the likelihood of new strikes on Iran, though attacks on ships near the Strait of Hormuz kept supply concerns in focus.
Brent LCOc1 fell 1.5% to $96.91 (about R1,599) a barrel by 0629 GMT, while US West Texas Intermediate CLc1 fell 1% to $89.85 a barrel.
Brent fell 16% last week, the steepest weekly drop since the start of the Covid-19 pandemic.
Unless there is a meaningful diplomatic breakthrough accompanied by a sustained normalisation of shipping flows through the Strait of Hormuz, crude oil prices are likely to retain a geopolitical risk premium, with near-term support seen at $93 a barrel for Brent
— Sugandha Sachdeva, founder of SS WealthStreet
“The [oil] market appears to be pricing in a relatively optimistic scenario of de-escalation, even though a comprehensive agreement between Washington and Tehran has yet to materialise,” said Sugandha Sachdeva, founder of SS WealthStreet, a New Delhi-based research firm.
“Unless there is a meaningful diplomatic breakthrough accompanied by a sustained normalisation of shipping flows through the Strait of Hormuz, crude oil prices are likely to retain a geopolitical risk premium, with near-term support seen at $93 a barrel for Brent,” she said.
Trump said on Sunday he was unlikely to order fresh attacks on Iran as long as talks to end the conflict progressed, even as both countries reported that shipping had been hit in or near the Strait of Hormuz.
He had hinted at renewing attacks on Iran after last week’s US midterm elections, but there has been no sign of a large-scale US military operation. Iran has said it would respond by striking US and Israeli targets.
Tim Waterer, chief analyst at KCM Trade, called Trump’s comments “more measured” but said “the market is still waiting to see whether the midterms have produced a lasting shift in Trump’s approach to the conflict, or whether this is just another temporary change in tone.”
Oil is headed for a glut again as recovering Middle Eastern oil flows, rising production from other countries and weak demand have pushed global supply above consumption, JPMorgan said in a report on Friday, estimating a surplus of 1.1-million barrels per day in September, widening to 1.4-million bpd in October.
Separately, the Iran-aligned Houthis said they were responsible for an attack on Saudi Aramco’s offices in the capital Riyadh on Sunday that left windows blown out but no reported casualties.
Reuters
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