Brent: Lower prices tied to US-Iran talks – MUFG
MUFG’s Lee Hardman highlights a sharp adjustment lower in energy markets, with Brent down about 16% and still weakening. Renewed investor optimism over a potential US-Iran deal and increased diplomatic activity across the Middle East are supporting lower Oil prices.
Oil prices continued their sharp weekly drop on Monday, with Brent crude nearing $97 per barrel after a 16% decline last week, as hopes for a diplomatic solution to the US-Iran conflict diminished concerns about potential supply disruptions. West Texas Intermediate (WTI) crude hovered around $91 per barrel. This decline marks a retreat from a six-month peak hit at the end of October, fueled by optimism that the Democratic victory in the US midterm elections would reduce tensions.
However, contradictory statements from US officials have kept the oil market uncertain. US Secretary of State Marco Rubio dismissed expectations of a breakthrough in talks with Iran, labeling Iranian demands as "outrageous and ridiculous." Meanwhile, President Donald Trump expressed a more conciliatory stance, suggesting military strikes on Iran were "highly unlikely" if negotiations advanced.
The conflicting signals have left traders uncertain about the prospects for a lasting resolution to the conflict, which has disrupted energy exports from the Persian Gulf. Although oil prices are falling, security threats persist in the Middle East, including an attack on a tanker in the Strait of Hormuz and damage to Saudi Aramco offices by Iran-backed Houthi rebels.
This has raised fears that further hostilities could disrupt crude shipments and reverse recent price declines. Geopolitical analyst Jorge Leon of Rystad Energy AS noted that the Democratic win in the US midterm elections does not guarantee a diplomatic breakthrough and warned that renewed conflict could quickly erase the recent price drop.
Despite continued attacks on vessels through the Strait of Hormuz, crude exports from the Persian Gulf have returned to near pre-war levels. If a deal leads to the lifting of the blockade, Brent crude could drop to between $70 and $85 per barrel, but the global benchmark still carries a risk premium due to the ongoing threat of military confrontation between Washington and Tehran.
In other developments, Ukraine struck a sixth Russian oil refinery in a week, escalating its attacks on energy infrastructure that finances Russia's war. Market participants will be watching upcoming monthly oil market reports from the US Energy Information Administration, OPEC, and the International Energy Agency.
Written by urgent.news from Nairametrics's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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