Key Takeaways
- • Brent crude futures fell towards $97 a barrel and West Texas Intermediate traded around $91 on Monday, after Brent declined more than 16% last week, the steepest weekly fall since April 2020, according to Bloomberg.
- • Prices have retreated sharply from six-month highs in late October, following Democratic victories in the US midterm elections that raised expectations of reduced military escalation against Iran.
- • US Secretary of State Marco Rubio played down the likelihood of an imminent US-Iran peace breakthrough, calling Tehran's negotiating demands unacceptable.
- • Rystad Energy warned that renewed escalation could quickly reverse much of the recent decline, with a tanker reportedly struck near the Strait of Hormuz and Houthi attacks on Saudi Aramco facilities in Riyadh.
- • Commonwealth Bank of Australia estimates that an agreement lifting Iranian restrictions could push Brent down to between $70 and $85 a barrel.
Summary
Oil prices extended their sharp decline on Monday after recording their biggest weekly fall since April 2020, as traders weighed prospects for a diplomatic resolution to the US-Iran conflict against renewed attacks on Middle Eastern energy infrastructure, according to Bloomberg. Brent crude futures fell towards $97 a barrel after declining more than 16% last week, while West Texas Intermediate traded around $91. Prices have retreated sharply from their six-month highs in late October, following Democratic victories in the US midterm elections that raised expectations of reduced military escalation against Iran.
Uncertainty nonetheless persists over the prospects for a peace agreement. US Secretary of State Marco Rubio played down the likelihood of an imminent breakthrough, describing Tehran's negotiating demands as unacceptable, while President Donald Trump indicated that further military strikes were unlikely if talks made substantial progress.
Geopolitical risks remain elevated. A tanker was reportedly struck by an unidentified projectile near the Strait of Hormuz over the weekend, and Iran-backed Houthi forces attacked Saudi Aramco facilities in Riyadh. Analysts at Rystad Energy warned that renewed escalation could quickly reverse much of the recent decline in crude prices.
Supply conditions are mixed. Despite continuing disruptions, Persian Gulf oil exports have recovered towards pre-war levels, while OPEC production reached approximately 88% of February's output in October. Iranian production remains constrained by the US naval blockade, and Commonwealth Bank of Australia estimates that an agreement lifting these restrictions could push Brent prices down to between $70 and $85 a barrel.
Uncertainty nonetheless persists over the prospects for a peace agreement. US Secretary of State Marco Rubio played down the likelihood of an imminent breakthrough, describing Tehran's negotiating demands as unacceptable, while President Donald Trump indicated that further military strikes were unlikely if talks made substantial progress.
Geopolitical risks remain elevated. A tanker was reportedly struck by an unidentified projectile near the Strait of Hormuz over the weekend, and Iran-backed Houthi forces attacked Saudi Aramco facilities in Riyadh. Analysts at Rystad Energy warned that renewed escalation could quickly reverse much of the recent decline in crude prices.
Supply conditions are mixed. Despite continuing disruptions, Persian Gulf oil exports have recovered towards pre-war levels, while OPEC production reached approximately 88% of February's output in October. Iranian production remains constrained by the US naval blockade, and Commonwealth Bank of Australia estimates that an agreement lifting these restrictions could push Brent prices down to between $70 and $85 a barrel.
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