Oil prices were down by more than 5 per cent on Tuesday, with Brent falling below $80 for the first time in nearly a month, as markets digested conflicting claims over possible negotiations between the US and Iran.
US President Donald Trump on Monday said Washington was restarting talks with Tehran, claiming the latter was keen to forge a deal, but eventually blasted Iran for being “duplicitous” in their stance.
Iran quickly denied that, saying their only active discussions were with Oman on the reopening of the Strait of Hormuz. On Tuesday, US Secretary of State Marco Rubio said progress has been made in talks with Iran and Oman, but no final agreement has been reached.
Brent, the benchmark for two-thirds of the world's oil, was down 5.13 per cent to $79.47 a barrel at 8.33pm UAE time. The last time it was below $80 was in the second week of July, before hostilities resumed.
West Texas Intermediate, the gauge that tracks US crude, retreated 5.43 per cent to $75.98 per barrel. WTI was last below $70 in the first week of July.
“The oil market continues to trade predominantly as a function of geopolitical developments in the region, with this week's price action illustrating how rapidly participants have repriced risks,” said Ahmad Assiri, a research strategist at Australia-based broker Pepperstone.
“Investors remain reluctant to fully price out the risk of renewed escalation, leaving the market front and centre influenced by geopolitical headlines.” The prospect of oil at $100 levels could not be ruled out, “despite a broader outlook that currently favours lower prices”, he added.
The ripple effects of the war on global oil prices have made it difficult for governments, energy companies and analysts to project where the market is heading. The attacks by Yemen's Houthi rebels on Red Sea shipping have compounded the situation.
On Sunday, Opec+ agreed to increase crude oil output for a sixth consecutive month in September, pledging that the group will continue to monitor developments and act accordingly.
“Any actions undermining energy supply security, whether through attacks on infrastructure or disruption of international maritime routes, increase market volatility and weaken the collective efforts … to support market stability for the benefit of producers, consumers and the global economy,” it said on the Opec website.
Saudi Aramco on Tuesday said it is studying an expansion of its East-West Pipeline and the establishment of new export routes as the “maritime blockade” by Houthi rebels squeezes access through the Red Sea. Other major oil-exporting countries, including the UAE, are also exploring more options to ensure the steady shipments of their petroleum products.
“The [war's] implications are global … prolonged disruption can raise fuel costs, inflation risks, shipping costs and economic uncertainty worldwide,” said Keith King, a former White House lead communications engineer who advises executives and governments.
“Countries and companies that invest in diversified supply routes, storage and infrastructure will be better positioned to manage future geopolitical shocks.”
