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Oil prices slumped to a 10-week low on Monday after US President Donald Trump said on Sunday it was “highly unlikely” that the US would renew its attacks on Iran.
Brent crude, the international benchmark, fell as much as 7.9 per cent to $90.56 a barrel, its lowest level since August 31, as traders weighed the potential for a negotiated end to the conflict. It later settled 5.9 per cent lower at $92.57 a barrel.
West Texas Intermediate, the US benchmark, settled 4.4 per cent lower at $86.85 a barrel.
Trump told CNN on Sunday that a decision on whether to renew strikes on Iran would depend on “whether or not they sign a very strong agreement . . . The answer is highly unlikely it’s going to be necessary.”
“Trump clearly prefers a diplomatic solution,” said Arne Rasmussen, chief analyst at Global Risk Management. While there remained a substantial gap between the two sides, oil prices had reacted to a shift in expectations, he added.
Monday’s price falls extend an oil market sell-off triggered by the Republicans’ historic defeat in last week’s US midterm elections. Last week, Brent recorded its biggest weekly drop since April 2020.
“The US midterm results made it clear that voters want the Iran war to end, and the oil market seems to think [Trump] will heed the people’s will,” Energy Aspects analysts Amrita Sen and Daniel Sternoff wrote in a note.
However, they added that Iran was unlikely to offer new concessions to Trump when its leaders knew that Congress might start trying to cut war funding in a few months’ time.
Dated Brent, Europe’s physical oil price for immediate delivery, has fallen more sharply than futures prices as a result of reduced shipping costs. It traded at $92.25 a barrel on Monday, making it cheaper than oil for delivery in January.
Dated Brent peaked at $136.39 a barrel on October 5 when front-month Brent was at $103.40, and its decline has made feedstock for European refineries cheaper.
Meanwhile, attacks on Middle Eastern shipping have continued, underscoring the risks to oil supplies despite what traders see as a more positive diplomatic outlook.
The UK Maritime Trade Operations agency said a tanker in the Strait of Hormuz — the vital waterway connecting the Gulf to global markets — was hit by an unknown projectile on Saturday. Another tanker was struck while exiting the Gulf last Thursday, it said.
