Brent and WTI crude oil futures dropped more than 5% on Monday after President Donald Trump held off on a new strike against Iran while seeking a quick deal. Iran's Foreign Ministry denied any talks were scheduled, and analysts said the price drop could reverse if the diplomatic push stalls.
Oil prices fell more than $5 a barrel on Monday after Trump held off on a fresh attack on Iran in hopes of sealing a quick deal, even though Tehran said no talks were planned. Brent crude dropped $4.49, or 5.11%, to $83.44 a barrel at 1315 GMT, clawing back some of an earlier three-week low. West Texas Intermediate fell further, sliding $5.39, or 6.37%, to $79.28 a barrel, and both benchmarks posted their biggest daily falls since last Monday.
The two contracts had jumped more than 20% last month after fighting between the U.S. and Iran resumed and attacks on several tankers near Oman deterred shippers from entering the Gulf.
Iran denies talks are scheduled
Trump said Sunday that negotiations with Iran would begin Monday afternoon, citing the talks as his reason for calling off the strike. But Iran's Foreign Ministry spokesperson, Esmail Baghaei, told reporters there are no negotiations planned with the U.S., directly contradicting the president's account. Baghaei added that a separate deal with Oman over the Strait of Hormuz was close, though shipping through the waterway would not return to how it ran before the war began in February.
Tanker attacks and OPEC+ supply keep pressure high
Meanwhile, six Saudi-flagged supertankers changed course in the Gulf of Aden and were heading toward southern Africa after Yemen's Houthi movement threatened to target Saudi shipping, ship-tracking data showed. The UK Maritime Trade Operations has reported three tanker attacks since Saturday.
OPEC+ approved a production quota increase of around 188,000 barrels per day from September on Sunday. Still, export disruptions from the Gulf, Russia and Kazakhstan tied to the Iran and Ukraine wars have kept most of this year's monthly OPEC+ hikes from reaching the market, tightening supply. Kazakhstan's crude oil and gas condensate output fell to about 1.85 million barrels per day in July from 2.16 million bpd in June, an industry source told Reuters, tying the decline to disruptions at the Caspian Pipeline Consortium, the country's main export route.
Analysts see the drop as fragile
PVM analyst Tamas Varga said he expects firmer prices in August unless oil flows in the region recover meaningfully and demand weakens. Given the current volatile trading conditions, according to Reuters: "the odds of getting it embarrassingly wrong are reasonably high."
The two-year Treasury yield dipped 2 basis points to 4.246%, while the 10-year rate dropped 3 basis points to 4.680%. Tickmill Group strategist Patrick Munnelly said the reduced odds of a near-term Hormuz disruption are now priced into crude, but cautioned that resuming talks does not guarantee the strait reopens on the same timetable.
Sources: Reuters, MarketWatch
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