Oil prices declined on Monday after US President Donald Trump indicated that he was unlikely to order fresh military strikes against Iran as long as talks to end the conflict continued. However, attacks on ships in and around the Strait of Hormuz kept concerns about possible disruptions to global oil supplies alive.
However, his comments came even as the US and Iran reported attacks on shipping in or near the Strait of Hormuz, a major route for global oil transportation, according to Reuters. Alexander Drozdenko, the regional governor, confirmed the fire after the reported drone attack, according to Reuters. He added that Trump’s latest comments, indicating that fresh strikes against Iran were highly unlikely, had added further pressure on oil prices. Weakness in the physical oil market is another reason behind the fall in prices. This means that oil supplies from the region have remained strong despite concerns about the conflict. Trump’s latest comments have raised questions about whether his position on the Iran conflict has changed for the long term. Tim Waterer, chief analyst at KCM Trade, described Trump’s comments as more measured. Oil markets could face another supply glut as oil production and supplies increase while demand remains weak.
JPMorgan estimated that the global oil market had a supply surplus of 1.1 million barrels per day in September. The bank expects this surplus to widen to 1.4 million barrels per day in October. Because investors are hopeful that the US and Iran could reach a peace agreement, oil prices have continued to decline. Because of hopes for a US-Iran peace deal rather than clear signs of progress, ole Hansen, an analyst at Saxo Bank, said oil was trading lower.
Giovanni Staunovo, an analyst at UBS, said continued high oil flows from the Middle East were putting pressure on prices. However, he said oil markets were waiting to see whether the US midterm elections had led to a lasting change in Trump’s approach to the conflict or whether his latest comments were only a temporary shift in tone, according to Reuters. A supply surplus means that more oil is being produced than consumers and businesses are using, which can put further pressure on prices, according to Reuters.
Trump said on Sunday that he was highly unlikely to order fresh attacks on Iran as long as negotiations to end the conflict continued. Recovering oil flows from the Middle East, higher production from other countries and weak demand have pushed global oil supply above consumption, according to a JPMorgan report published on Friday. In another development, a fire broke out at Russia’s Kirishi oil refinery following a Ukrainian drone attack in the region on Monday.
