Oil fell to a minimum since August after Trump's statements about Iran
World oil prices continued to plummet on Tuesday, November 10, amid expectations of a possible end to the US war with Iran. Benchmark Brent fell below $90 per barrel for the first time since late August, losing up to 3.6% during trading.
According to Bloomberg, investors are increasingly pricing in a resolution of the Middle East conflict following statements by US President Donald Trump about the lack of necessity for new military strikes on Iran.
As reported by Financial Times, during Tuesday's session Brent fell to $89.21 per barrel – its lowest level since August 31. Later, quotes partially recovered, rising to about $90.50. American West Texas Intermediate (WTI) crude traded near $85.30 per barrel.
The new drop came after a massive sell-off on Monday, November 9, when Brent closed down 5.85% at $92.57 per barrel. Thus, the oil market continues to shed the geopolitical premium that had formed due to risks of energy supply disruptions from the Persian Gulf.
The main impetus for the price decline was signals from Washington about the possible winding down of the military operation against Iran. After meeting with Qatar's Prime Minister Sheikh Mohammed bin Abdulrahman Al Thani, Trump said that new US strikes on Iran are not currently necessary.
The US President also expressed confidence that the conflict could end soon. At the same time, he emphasized that the US armed forces remain ready for new actions if necessary.
Expectations of a faster end to the war intensified after the Republican Party's defeat in the midterm elections to the US Congress. According to Bloomberg, the election results increased political pressure on Trump, who is trying to find a way to end the conflict that has lasted for nine months.
Democrats in Congress are considering using the approach of the budget deadline on December 11, when there will be a threat of a federal government shutdown, to increase pressure on the presidential administration and achieve an end to the war with Iran.
Meanwhile, diplomatic settlement remains uncertain. Qatar is mediating between Washington and Tehran, but previous negotiations have not yet led to final agreements.
Iran insists on ending the American naval blockade of its ports and lifting sanctions. The US, for its part, demands guarantees of shipping safety in the Strait of Hormuz and concessions regarding Iran's nuclear program.
Despite the softening of Washington's rhetoric, threats to energy infrastructure and maritime transportation persist. In particular, an attack on Saudi Arabia's oil pipeline infrastructure was reported the day before. This restrains expectations of a quick restoration of stable supplies from the region.
Senior economist at Itochu Research Institute Takahiro Asaoka told Bloomberg that the US election results significantly narrowed Trump's options for a prolonged large-scale military operation against Iran. In his assessment, this reduces the geopolitical premium on oil prices, although without an agreement with Tehran, Brent is likely to remain above $85 per barrel.
Further dynamics of oil prices will depend on the concrete results of negotiations and the situation with maritime transportation through the Strait of Hormuz. The mere announcements of a possible end to the war do not yet mean the restoration of unimpeded oil supplies from the Middle East.
Based on materials from: Bloomberg, Financial Times
