KEY POINTS

• Brent crude fell 5.2 per cent to $93.27 per barrel on Monday, its lowest level since early September.
• US West Texas Intermediate dropped 4.5 per cent to $86.71 per barrel.
• US President Donald Trump said fresh strikes on Iran were highly unlikely if negotiations continued.
• Attacks on vessels near the Strait of Hormuz continue to raise concerns about possible supply disruptions.

MAIN STORY

Brent crude prices fell more than 5 per cent on Monday after US President Donald Trump said he was unlikely to order fresh military strikes on Iran as long as negotiations to end the conflict continued.

Brent crude futures dropped by $5.05, or 5.2 per cent, to $93.27 per barrel by 1427 GMT, after falling to $93.21 earlier in the session, their lowest level since early September.

US West Texas Intermediate crude also declined by $4.12, or 4.5 per cent, to $86.71 per barrel.

The losses extend a sharp decline in oil prices last week, when Brent fell 16 per cent to $93.22, recording its steepest weekly drop since the start of the COVID-19 pandemic.

Trump’s comments on Sunday eased concerns about another round of military attacks that could further disrupt oil supplies from the Middle East.

THE ISSUES

Despite the reduced likelihood of fresh US strikes, attacks on ships in or near the Strait of Hormuz have kept supply concerns alive.

Both the United States and Iran reported that vessels had been hit in the area, a key route for global oil shipments.

Trump had suggested after last week’s US midterm elections that attacks on Iran could resume, but there has been no indication of a large-scale US military operation.

Iran has warned that it would respond to any fresh attacks by targeting US and Israeli interests.

The competing developments have left oil markets weighing the prospect of a diplomatic settlement against the risk of further disruption to shipping and energy supplies.

WHAT’S NEXT

Developments in negotiations between Washington and Tehran will remain important to oil price movements, alongside security conditions around the Strait of Hormuz.

The market is also facing the possibility of excess supply as high prices weigh on demand. JP Morgan estimated that the global oil market recorded a surplus of 1.4 million barrels per day in October.

BOTTOM LINE

Brent crude’s decline reflects reduced expectations of renewed US military action against Iran. However, attacks on shipping near the Strait of Hormuz mean the risk of supply disruption has not disappeared.

Reuters