Brent crude kept sliding after Monday's settlement and hit its lowest since late August, after US President Donald Trump downplayed the chance of renewed strikes on Iran. Some analysts also point to signs of a return to excess supply.
Brent crude futures settled down $5.75, or 5.85%, at $92.57 a barrel on Monday. Prices then kept falling after settlement and were last down more than $7 a barrel, according to Reuters.
US West Texas Intermediate futures settled down $3.98, or 4.38%, to $86.85. The Brent benchmark had already plunged by 16% last week, its steepest weekly drop since the start of the COVID-19 pandemic.
Trump signals restraint while shipping stays under attack
On Sunday, Trump said he was highly unlikely to order fresh attacks on Iran as long as talks to end the conflict progressed. Still, both countries reported that shipping had been hit in or near the Strait of Hormuz.
TACenergy analysts said in a note, according to Reuters: "This seems to have encouraged sellers on the prospects for peace" even as the fighting continues.
Peace talks remain uncertain, however. A senior Iranian security official told state media that Tehran has no plans to negotiate unless Washington takes practical steps to meet seven conditions set out in a June interim agreement. Senior US and Gulf officials also cast doubt on the chances of an imminent deal.
Physical market shows signs of excess supply
Some analysts say the global oil market is showing signs of a return to excess supply as demand drops because of high prices. JPMorgan estimated the global surplus at around 1.4 million barrels per day in October.
Output is also rising. A Reuters survey found that crude output from the 11-member OPEC rose by 1.38 million bpd to 22.87 million bpd in October, led by gains in Saudi Arabia, Kuwait and Iraq.
Morgan Stanley said Dated Brent has weakened to a discount to the nearby futures contract, highlighting weakness in the physical market. Meanwhile, stocks of crude in the US Strategic Petroleum Reserve fell to 279.5 million barrels last week, the lowest level since October 1982.
Source: Reuters via Investing.com
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