SINGAPORE: Oil prices tumbled more than 6 percent on Monday after the US and Iran paused their strikes over the weekend, ending two weeks of attacks and raising hopes of a diplomatic path that could de-escalate the conflict and allow shipping to resume in the Strait of Hormuz.
Brent crude futures fell $6.20, or 6.4 percent, to $90.58 by 9:20 a.m. Saudi time, after briefly slipping under the key support level of $90 earlier in the session. US West Texas Intermediate crude stood at $83.51 a barrel, down $5.80, or 6.5 percent. Both contracts were trading at their lowest levels in nearly a week after climbing over the previous three weeks.
Brent had touched $100 a barrel as the conflict, which curbed oil shipments through the Strait of Hormuz, spilled into the Red Sea and disrupted exports from Saudi Arabia, the world’s top exporter, via the Bab el-Mandeb strait to Asia.
The US ambassador to the UN, Mike Waltz, told “Fox News Sunday” and other US outlets that President Donald Trump had decided to pause American attacks to allow more time for diplomacy. “Oil prices fell sharply in early trading as the US and Iran refrained from further military action, offering the first tangible signs of a potential de-escalation in tensions,” ING analysts said in a client note. “The price action in oil this morning clearly reflects the market’s desperation for positive news.”
Despite the pause, fewer than 10 commodity vessels passed through the Strait of Hormuz each day over the weekend, shipping data from Kpler showed. “Any rebound in flows through the Strait of Hormuz is likely to prove slow and partial, as many shippers remain wary and will want greater confidence in their safety before they bring more empty ships into the Strait,” said MST Marquee analyst Saul Kavonic. Traffic through the Bab el-Mandeb strait also fell on Sunday after Yemeni Houthis attacked Saudi oil installations along the Red Sea coast, though a third Chinese supertanker exited via the strait.
Even so, some analysts expect markets to stay supported if crude supplies remain affected by ongoing shipping risks in the Middle East and the Russia-Ukraine war. “As the Middle East conflict widened to the Red Sea and Ukrainian drones struck Russian ships and refineries … Sustained supply disruption would likely keep oil prices elevated and continue to pose upside risks to global inflation,” UOB analysts said in a note. Ukraine said it had hit several Russian oil sites over the weekend.
