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(Bloomberg) — Oil fell after US President Donald Trump said he called off a planned attack on Iran and that new talks with the Islamic Republic would begin on Monday.
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West Texas Intermediate lost more than 7% in early trading, before paring some of the decline on mixed signals from Iran, to trade near $79 a barrel. Iran suggested negotiations with Oman to get more ships moving through the Strait of Hormuz are making progress but it was not “currently” in talks with the US.
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Trump said on Sunday allies in the Middle East, including Saudi Arabia, had asked him to pursue a deal with Iran instead of an attack, adding that further negotiations are contingent on the reopening of Hormuz. Before the war, the waterway carried about a fifth of the world’s oil supply. Still, there’s little clarity on those negotiations and no sign the Islamic Republic is willing to allow vessels free passage through the strait.
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“The market read for crude oil is overly bearish, as to be expected with the asymmetric downside sensitivity to headlines, but we anticipate the market may be quickly disappointed when the flows don’t surge like they did post MoU,” said Ryan McKay, senior commodity strategist at TD Securities.
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The US benchmark swung through a roughly $26 range last month as fighting resumed following the collapse of a June truce and memorandum of understanding, and the conflict expanded to the Red Sea. The US pulled back on daily strikes in late July.
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Hormuz is again all but shut. While some ships are continuing to cross the strait, there’s still a significant threat to vessels in the waterway. UK Maritime Trade Operations said a tanker off Oman reported an explosion in close proximity on Sunday, highlighting the persistent risks for shipping.
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European natural gas also pared losses after falling as much as 6.3% in early trading.
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Meanwhile, Gulf producers continue to seek alternative export routes. Turkey and Iraq agreed to extend an expired oil pipeline deal by one year that would be able to export as much as 750,000 barrels a day, according to Iraq’s Oil Ministry.
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Elsewhere, Kazakhstan’s Energy Ministry said the Caspian Pipeline Consortium continues to operate with oil intake at 100,000 tons a day from Aug. 1 after a temporary suspension on Friday. While CPC will allow vessels to load from its terminal on Russia’s Black Sea coast, the pace of exports will also depend on whether tankers are willing to risk the journey.
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A series of drone attacks on tankers loading at or near the facility has disrupted flows from the CPC, the main export route for Kazakh crude that’s widely used by European refineries.
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—With assistance from Alex Longley.
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English (US)