Oil prices fell sharply on Monday, with Brent crude dropping about 7% to a three-week low after US President Donald Trump held off on a fresh attack on Iran in hopes of securing a deal that could eventually boost oil supplies from the Gulf.
Front-month Brent crude futures fell US$6.35, or 7%, to settle at US$83.77 a barrel, while US West Texas Intermediate (WTI) crude dropped US$4.33, or 5.1%, to US$80.34.
Brent’s settlement was its lowest since July 13, although the decline was partly influenced by the switch to the cheaper October contract after the more expensive September contract expired on Friday. October Brent was down 4.7% from its Friday close.
The sharp selloff came despite conflicting claims over possible negotiations between Washington and Tehran.
Trump said talks with Iran were taking place and had cited the prospect of discussions as a reason for calling off planned attacks. Iran’s Foreign Ministry spokesman Esmail Baghaei, however, said no negotiations or meetings with the US were taking place.
“Today’s sharp selloff … in crude futures looks like another overreaction to Trump’s comments that a deal with Iran is imminent following his weekend threats of massive attacks that were also suggested as imminent,” analysts at energy advisory firm Ritterbusch and Associates said.
Trump also renewed his call for US oil companies to lower gasoline prices, criticising Chevron and Exxon Mobil for making too much money. US gasoline and diesel prices fell around 5% during Monday’s session.
Meanwhile, shipping activity around key oil routes remained disrupted. Six Saudi-flagged supertankers have changed course in the Gulf of Aden and are heading towards southern Africa following threats from Iran-backed Houthi forces to target Saudi shipping.
Around a fifth of global oil supplies passed through the Strait of Hormuz before the US and Israel began bombing Iran on Feb 28. Traffic through the waterway has since slowed following reports of vessel attacks.
Supply disruptions linked to the Iran and Ukraine conflicts have also limited the impact of successive OPEC+ production increases this year.
OPEC+ on Sunday approved a production quota increase of around 188,000 barrels per day from September.
Russia is also developing alternative cargo routes and increasing protection for ships in the Azov-Black Sea basin amid rising attacks linked to its war in Ukraine.
– REUTERS
