Oil Plunges 5% as Trump Signals Restraint on Iran Strikes
Brent crude fell nearly 5% to about $93 a barrel on Monday, its lowest since early September, as President Trump ruled out new strikes on Iran as talks go on.
Image: Wikimedia Commons / Acroterion
LONDON — Brent crude fell almost 5% on Monday, 9 November, to its lowest since early September, after President Donald Trump said he was highly unlikely to order fresh strikes on Iran while talks continue, Reuters reported. Brent was down $4.57, or 4.65%, at $93.75 a barrel by 12:04 p.m. EDT, after an intraday low of $92.80, while US West Texas Intermediate fell $3.19, or 3.51%, to $87.64.
The slide extended the rout. Brent plunged 16% last week to a two-month low of $93.22, its steepest weekly fall since the start of the Covid-19 pandemic, after closing on Friday at $98.32. Wall Street rallied on the same hopes on Monday, with the Dow up more than 540 points at the open.
Key Takeaways
- Brent fell 4.65% to $93.75 a barrel by midday on Monday, after touching $92.80, its lowest since early September.
- US West Texas Intermediate dropped 3.51% to $87.64 on the lower chance of new US strikes on Iran.
- The fall extends a 16% plunge last week, Brent's steepest weekly drop since the Covid-19 pandemic began.
- President Donald Trump said fresh attacks were highly unlikely while talks progress.
Why traders sold
The trigger was Trump's comment on Sunday that he was highly unlikely to order new attacks on Iran as long as negotiations produce a strong agreement. A week earlier he had hinted at a resumption of strikes, but none has followed. "This seems to have encouraged sellers on the prospects for peace even while the actual fighting is not slowing down," analysts at TAC Energy said.
On Monday, Trump met Sheikh Mohammed bin Abdulrahman Al Thani, Qatar's prime minister, at the White House. Reports said Tehran had approved a proposal to reopen the Strait of Hormuz within two days for an end to the US blockade and the release of $8 billion in frozen assets, but neither government has confirmed those terms. Tehran will not negotiate unless Washington meets seven conditions from a June interim agreement, a senior Iranian official said, and Secretary of State Marco Rubio said he saw little hope of a breakthrough.
A market already awash in oil
Diplomacy is only part of the story. JP Morgan put the global oil surplus at around 1.4 million barrels a day in October, and a Reuters survey found OPEC output rose by 1.38 million barrels a day to 22.87 million. Morgan Stanley noted dated Brent has weakened to a discount against the nearby futures contract, a sign of soft demand. "Crude futures are under selling pressure once again as oil volumes continue strong through the Strait of Hormuz," said Dennis Kissler of BOK Financial.
| Measure | Reading | Change |
|---|---|---|
| Brent crude, 12:04 p.m. EDT Monday | $93.75 a barrel | Down $4.57, or 4.65% |
| WTI crude, 12:04 p.m. EDT Monday | $87.64 a barrel | Down $3.19, or 3.51% |
| Brent, last week | Down 16% | Steepest weekly fall since Covid-19 |
| US Strategic Petroleum Reserve | 279.5 million barrels | Lowest since October 1982 |
The risks have not gone away
That calm rests on a fragile foundation. Attacks on shipping in and near the Strait of Hormuz have continued even as the talks advanced, and the strait carries about one-fifth of global petroleum liquids consumption, according to the US Energy Information Administration. On Sunday, the Houthis claimed an attack on Aramco's offices in Riyadh. One measure had Brent down more than 5% during the session, and traders are betting the talks hold. If a tanker is hit, the same market can move just as fast the other way.
Frequently Asked Questions
Why did oil prices fall on Monday?
President Donald Trump said on Sunday that he was highly unlikely to order fresh strikes on Iran while talks to end the war progress. Traders took that as a lower risk to supply through the Strait of Hormuz, and sold crude.
How far has Brent crude fallen?
Brent plunged 16% last week, its steepest weekly drop since the Covid-19 pandemic began, and fell almost 5% more on Monday to $93.75.
Is a deal between the United States and Iran close?
No deal has been confirmed. Reports said Tehran approved a proposal to reopen the Strait of Hormuz within two days for an end to the US blockade and $8 billion in frozen assets, but neither government has confirmed it.
What happens next?
The next test comes on Tuesday, when the United States releases October consumer price index data. Traders will also watch for a written proposal from the Qatar-mediated talks this week.
