Oil hits over 1-week low on hopes of boost to diplomacy in Iran war

Brent crude futures dropped to a one-week low of US$101.71 a barrel on Monday (Sep 21) as hopes grew that diplomacy could de-escalate the Iran war this week. The price fell by US$2.16, or 2.07%, bringing it down below the key psychological support of US$100 a barrel. US West Texas Intermediate crude also hit its lowest level since September 10, settling at US$98.15 a barrel, down US$2.15, or 2.14%, after falling 1.58% in the previous session.

Tim Waterer, chief market analyst at KCM Trade, suggested that a degree of risk premium was being removed from oil prices due to optimism surrounding potential diplomacy. However, it remains uncertain whether this hope will be realized. Iran and the US exchanged new threats on Sunday, with President Trump expressing openness to meeting Iranian President Masoud Pezeshkian, who is attending the UN General Assembly in New York.

While tensions in the Middle East persist, Yemen's Iran-backed Houthis attacked "sensitive" sites in Saudi Arabia, including Riyadh and Aramco's facilities in Yanbu. Saudi Aramco increased exports through the Strait of Hormuz after halting some shipments, allowing Opec's largest producer to recover exports to over 4 million barrels per day (bpd) in September. This recovery marks a significant turnaround from August's lowest point of 2.4 million bpd.