Oil falls as Trump downplays prospect of escalation with Iran

Oil prices dipped on Tuesday, following a decline the day before, as US President Donald Trump signaled his intention to refrain from military action against Iran in the near term, reducing concerns of supply interruptions in the Middle East. Brent crude futures slipped 70 cents, or 0.75%, to $91.88 a barrel, while US West Texas Intermediate (WTI) futures dropped 78 cents, or 0.90%, to $86.07 a barrel.

Both major benchmarks had fallen 1% earlier in the day. Brent crude settled 5.85% lower in the previous session, after trading at its lowest level since August 31. Trump indicated on Monday that he would postpone further military strikes against Iran for now, following appeals from regional countries, including Qatar's prime minister during White House talks.

Trump also reaffirmed his stance to maintain a naval blockade in the Strait of Hormuz. Market analysts noted that the market's focus remains on Trump's more conciliatory stance towards Iran since the midterms, as attacks on shipping in the Strait of Hormuz have not yet escalated to warrant a new risk premium. OPEC oil production increased in October, driven by gains in Saudi Arabia, Kuwait, and Iraq, despite export restrictions.

Brent has declined roughly 22% from its six-month peak of $118, reached on October 30, as worries about potential military escalation from Trump after the US midterms have eased. However, there is still apprehension about potential shipping disruptions. Despite the recent price drop, prices are unlikely to plummet below $90 per barrel for Brent without more concrete evidence of de-escalation and a US-Iran agreement, according to Gregory Brew, a senior analyst at Eurasia Group.

Meanwhile, Russian and Ukrainian officials were scheduled to meet for two days of US-brokered talks to discuss a possible peace deal in their four-and-a-half-year conflict, which could encompass European security interests.