Oil prices dropped on Friday after President Donald Trump said the United States would not attack Iran before November's midterm elections, unwinding part of Thursday's sharp rally. The pullback came even as a Gulf of Mexico hurricane shut in US production and Iran weighed a response to a US proposal.
Brent crude fell 1.7% to $102.55 a barrel, while US West Texas Intermediate crude declined 1.4% to $90.22 a barrel, easing Middle East supply fears. The decline followed a Truth Social post in which Trump said both sides were holding talks with Tehran.
In the post, Trump wrote: "We will not be attacking Iran at any time prior to the Midterm Elections". He added that oil was still flowing through the Strait of Hormuz, claiming 22 million barrels moved through the waterway overnight with none coming from or going to Iran — a figure that could not be independently verified.
Thursday's rally unwinds
The retreat follows Brent's biggest daily jump in two weeks, when the contract rose more than 4% to $104.28 a barrel on Thursday. That spike came after reports the Pentagon was weighing strike options before the midterms, while Houthi forces claimed attacks on infrastructure in Saudi Arabia and on vessels crossing the strait.
Roughly a fifth of the world's oil and liquefied natural gas passed through the Strait of Hormuz before the US and Israel struck Iran in late February. Deutsche Bank analysts said talk of negotiations eased pressure into Thursday's close, but noted investors were still pricing a longer period of disruption into next year.
Iran reviewing US proposal
Traders are unwinding the risk premium they had built into crude on fears of wider strikes, now that Trump has de-escalated. Iranian Foreign Minister Araghchi said Tehran was reviewing Washington's response to Iran's proposal and expected to reply within the next few days. A positive reply could trigger a further oil selloff on hopes of improved supply, while a negative one would likely limit how far prices fall.
Gulf storm and China exports add to supply swings
A Gulf of Mexico storm has forced producers to halt around 1.3 million barrels per day of oil output and 1.1 billion cubic feet per day of natural gas production. Personnel were evacuated from 121 production platforms, about 33% of the 371 manned platforms in the Gulf, with workers also removed from five of 11 non-dynamically positioned rigs.
At the same time, China is set to resume fuel exports after a pause during the Golden Week holiday, a move expected to ease tight global supplies of diesel, gas and jet fuel.
Sources: Investing.com, The Guardian, InvestingLive
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