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(Bloomberg) — Oil extended a slump as US President Donald Trump announced a tentative ceasefire between Iran and Israel.
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West Texas Intermediate for August fell as much as 5.1% to $65.02 a barrel in early trading in Asia. The plunge — which followed a roller-coaster session on Monday that ended in steep losses — took prices to below their level on June 12, the day before Israel attacked Iran.
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In a move that will lower crude’s risk premium, Trump said that Israel and Iran had agreed to a “complete and total ceasefire,” which would begin at about midnight New York time, according to a post on Truth Social.
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The global oil market has been rocked by the crisis in the Middle East on concerns that the conflict could disrupt supplies from the region that pumps about a third of the world’s crude. Prices initially spiked, then retraced gains as the standoff unfolded, with Israel, Iran and the US all avoiding hits on oil-related infrastructure, with Tehran also opting not block the Strait of Hormuz.
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The crisis erupted earlier this month as Israel attacked Iran in a bid to eradicate its nuclear program, decimate its leadership, and degrade its military, with Tehran firing missiles in reply. In a major escalation, Trump then ordered a weekend strike against the Islamic Republic’s nuclear sites. Iran’s retaliation to that move was a limited missile salvo against Qatar.
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The tentative ceasefire in the Middle East — if it takes effect and lasts — may pull traders’ main focus back to the crude market’s underlying fundamentals. There are widespread expectations that oil supplies will run ahead of demand in the second half of this year, spurring a build-up in global stockpiles.
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The OPEC+ alliance — which includes Iran as member — has been reactivating idled capacity at a rapid pace in a bid to recapture market share. Further increases in collective supplies are expected in the months to come.
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Trump has made plain that he favors cheaper energy in a bid to buttress his economic agenda as he pushes on with his aggressive trade policy. On Monday, he demanded that energy producers push down crude prices following the US military strikes on Iran, while also urging the Energy Department to boost drilling.
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WTI traded at $65.54 a barrel at 6:47 a.m. in Singapore.
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