Oil falls over US$7 as Trump signals restraint on Iran

Brent crude futures experienced a significant decline, plummeting over US$7 a barrel, to their lowest level since late August. The benchmark settled at US$92.57 a barrel, down 5.85 per cent. West Texas Intermediate futures also decreased, ending US$3.98 a barrel lower at US$86.85. The Brent benchmark's loss of 16 per cent last week marked the steepest weekly decrease since the onset of the Covid-19 pandemic.

US President Donald Trump signaled his intention to refrain from launching further strikes on Iran, as long as ongoing talks aimed at resolving the conflict progressed successfully. Despite this reassurance, both countries reported shipping disruptions in or near the Strait of Hormuz, which bolstered the prospects for peace among sellers.

However, the cessation of large-scale military operations between the two nations remains uncertain. A senior Iranian security official disclosed that Tehran lacks plans to negotiate unless Washington fulfills the seven conditions outlined in a June interim agreement. Saudi Arabia and Oman emphasized the necessity of continuing diplomatic efforts to mitigate the regional crisis and ensure maritime security and sea lanes.

Traders expressed concern over oil volumes persisting through the Strait of Hormuz, as crude futures continued to be pressured by ample supply. Saudi Arabia's East-West pipeline was targeted by a fire, though there were no casualties, and operations remained unaffected. The Saudi-led coalition targeting Yemen's Iran-aligned Houthi rebels also destroyed a factory and a chemical plant crucial for missile components and fuel production.

Meanwhile, Saudi Aramco's Riyadh headquarters endured an attempted attack, causing debris to fall and windows to shatter across multiple floors.

The situation underscores the ongoing challenges in regional security and the need for effective diplomatic solutions to prevent further disruptions in oil supply chains.