Oil Slumps as Trump Holds Off Iran Attack, Says Talks to Resume
(Bloomberg) -- Oil fell after US President Donald Trump said new talks with Iran would begin on Monday after he called off a planned attack on the Islamic Republic.
Brent for October lost as much as 7.3%, after futures surged by almost a quarter in July to post the biggest monthly gain since March. West Texas Intermediate was below $80. Trump said on Sunday that he called off a massive attack on Iran after allies in the Middle East, including Saudi Arabia, asked him to pursue a deal instead.
The US leader said he’d agreed to cancel the assault, “subject to being able to rapidly make a DEAL” to quickly reopen the Strait of Hormuz, according to an earlier post on Truth Social. “Get to work, everybody, and get it DONE.”
“The drop is a reflection of relief that further escalation has been avoided,” said Takahiro Asaoka, a commodities researcher at Itochu Research Institute Inc. “The move appears to be largely driven by short covering as the geopolitical risk premium eases. A sustained decline in oil prices is difficult unless there’s an agreement that allows shipping through the Strait of Hormuz to return to normal.”
Brent swung through a roughly $32 range last month as fighting resumed following the collapse of a June truce. That saw the conflict spreading to the Red Sea and Jordan before another pause in late July to allow diplomatic efforts to continue was shattered.
European natural gas fell as much as 6.3% in early Asian trading.
Oil futures pared some of their early decline after UK Maritime Trade Operations said a tanker off Oman reported an explosion in close proximity on Sunday. That highlighted the persistent risks for shipping through Hormuz — which carried about a fifth of the world’s crude oil and liquefied natural gas in peacetime — after an LNG vessel was struck by a projectile late last week.
Meanwhile, Gulf producers continue to seek alternative export routes. Turkey and Iraq agreed to extend an expired oil pipeline deal by one year that would be able to export as much as 750,000 barrels a day, according to Iraq’s Oil Ministry.
Iranian Foreign Minister Abbas Araghchi said Sunday on Telegram that negotiations between Iran and Oman are in the final stages. The two countries that flank the strait are discussing a new route through it, but the talks don’t cover whether the waterway will be closed or open, a ministry spokesman said on Iranian state-run TV.
Elsewhere, major OPEC+ nations approved the latest small increase to their production quotas, a move that will complete the theoretical revival of supplies halted in 2023 and give them scope to add more barrels once the Middle East war ends.
In addition, Kazakhstan’s Energy Ministry said the Caspian Pipeline Consortium continues to operate with oil intake at 100,000 tons a day from Aug. 1 after a temporary suspension on Friday. While CPC will allow vessels to load, the pace of exports will also depend on whether tankers are willing to risk the journey.
A series of attacks on tankers loading at or near the Black Sea facility has disrupted flows from the CPC, a major export route for Kazakh crude.
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