Oil prices fell sharply on Monday, with West Texas Intermediate down 2.9% at $97.41 a barrel and Brent crude 2.7% lower at $101.10, as traders trimmed the Middle East risk premium on hopes of diplomatic progress between Washington and Tehran.
The decline followed comments from US President Donald Trump that he would probably be open to meeting Iranian President Masoud Pezeshkian during this week’s UN General Assembly.
Trump has also reportedly held off on military action against Yemen’s Iran-aligned Houthis for now, helping ease fears of an immediate widening of the conflict.
As a result, Brent crude pulled back to an 11-day low as markets focused on the possibility of diplomacy.
Improving Saudi export flows added pressure to prices. JPMorgan said
Saudi Arabia reportedly shipped around 2.9 million barrels a day through the Strait of Hormuz in recent days, up from about 700,000 barrels a day in August, despite disruption to the kingdom’s East-West pipeline. But, the physical picture remains far from normal.
Only around a dozen commodity vessels crossed Hormuz over the weekend with tracking systems switched on, compared with 35 a week earlier, according to industry data, while attacks have also disrupted Saudi export routes through the Red Sea.
"Investors are also pinning their hopes on a breakthrough in peace talks during this week’s UN General Assembly," said Tamas Varga, analyst at ICAP's oil trading unit, PVM Oil Associates.
"While demand might be gradually becoming aligned with supply, this optimism could turn out to be misplaced.
"The unpredictability of the next 5–6 weeks will possibly ensure that there is no significant price erosion, while the loss of time value, i.e. the approaching midterms, could limit upside potential, probably keeping prices below $120/bbl."
Further down the supply chain, Europe remains squeezed, with experts estimating the region could face a 510,000-barrel-a-day jet fuel deficit next quarter, while inventories at the Amsterdam-Rotterdam-Antwerp hub have fallen to their lowest since 2019.
