Oil prices tumble more than $7 on hopes of Iran peace
Photo: Reuters
Oil prices fell sharply on Monday, with Brent crude dropping more than $7 a barrel in post-settlement trading after US President Donald Trump signaled reluctance to launch fresh attacks on Iran, raising hopes of progress toward ending the conflict.
Brent crude futures settled down $5.75, or 5.85%, at $92.57 a barrel. Prices continued declining after settlement, falling more than $7. US West Texas Intermediate (WTI) crude futures dropped $3.98, or 4.38%, to settle at $86.85 a barrel. They later extended losses to more than $5.
Brent crude fell 16% last week, marking its steepest weekly decline since the beginning of the COVID-19 pandemic.
On Sunday, Trump said he was highly unlikely to order further strikes on Iran as long as negotiations to end the conflict continued. However, both countries reported attacks on shipping in or near the Strait of Hormuz.
“This seems to have encouraged sellers on the prospects for peace even while the actual fighting is not slowing down,” TACenergy analysts said in a note.
A senior Iranian security official told state media that Tehran had no plans to negotiate unless Washington took practical steps to meet seven conditions outlined in a June interim agreement.
Saudi Arabia's foreign minister and his Omani counterpart discussed the need to continue diplomatic efforts to contain the regional crisis and protect maritime security and shipping routes during a phone call on Monday, Saudi state media reported.
Trump was also scheduled to meet Qatar's prime minister, whose country has played a mediating role. However, senior US and Gulf officials expressed doubts about the possibility of an imminent agreement.
Meanwhile, Iraq has reached an understanding with Washington to allow its oil exports to pass through the Strait of Hormuz via a shipping route near Oman, Foreign Minister Fuad Hussein told Al Jazeera.
Despite the diplomatic developments, security concerns continued to weigh on the market. A fire was extinguished after Saudi Arabia's East-West pipeline was struck in the Medina region. The incident caused no casualties and did not disrupt operations, an energy ministry source told state media.
The Saudi-led coalition fighting Yemen's Iran-aligned Houthis also said it had destroyed a factory used to manufacture ballistic missile components and a chemical plant producing missile fuel.
The Houthis claimed responsibility for Sunday's attack on Saudi oil giant Aramco's corporate office in Riyadh. Debris from the attempted attack shattered windows across several floors.
“Fresh tanker incidents and an attack on Saudi Aramco’s offices show that shipping and regional security risks remain unresolved as traders price in a less disruptive outcome,” Gelber & Associates said.
WELL supplied oil market
Signs of ample supply also contributed to the price decline. Morgan Stanley said Dated Brent, used to price physical oil cargoes worldwide, had fallen to a discount against nearby Brent futures, indicating weakness in the physical market.
JPMorgan estimated the global oil surplus at around 1.4 million barrels per day in October as high prices weighed on demand.
OPEC oil production increased by 1.38 million barrels per day in October to 22.87 million bpd, according to a Reuters survey. Higher output from Saudi Arabia, Kuwait and Iraq led the increase.
Meanwhile, US crude oil and petroleum product inventories were expected to have declined last week, a preliminary Reuters poll showed. However, crude stocks in the US Strategic Petroleum Reserve fell to 279.5 million barrels, their lowest level since October 1982, according to the Department of Energy.
Source: Reuters (Adapted)
