Oil falls as Trump signals restraint on Iran despite fresh shipping attacks
By Enes Tunagur
LONDON, Nov 9 (Reuters) - Oil prices fell on Monday after US President Donald Trump downplayed the likelihood of renewed strikes on Iran, though attacks on ships near the Strait of Hormuz
kept supply concerns in focus.
Brent crude dropped by $1.65, or 1.7%, to $96.67 a barrel by 0830 GMT while US West Texas Intermediate lost 96 cents, or 1%, to $89.87.
The Brent benchmark plunged 16% last week for its steepest weekly drop since the start of the COVID-19 pandemic.
'RELATIVELY OPTIMISTIC SCENARIO'
"The (oil) market appears to be pricing in a relatively optimistic scenario of de-escalation, even though a comprehensive agreement between Washington and Tehran has yet to materialise," said Sugandha Sachdeva, founder of New Delhi-based research firm SS WealthStreet.
"Unless there is a meaningful diplomatic breakthrough accompanied by a sustained normalisation of shipping flows through the Strait of Hormuz, crude oil prices are likely to retain a geopolitical risk premium, with near-term support seen at $93 a barrel for Brent."
Trump said on Sunday that he was highly unlikely to order fresh attacks on Iran as long as talks to end the conflict progressed, even as both countries reported that shipping had been hit in or near the Strait of Hormuz.
He had hinted at renewing attacks on Iran after last week's US midterm elections, but there has been no sign of a large-scale US military operation. Iran has said it would respond by striking US and Israeli targets.
Tim Waterer, chief analyst at KCM Trade, called Trump's comments "more measured" but said the market is still waiting to see whether the midterms have produced a lasting shift in Trump’s approach to the conflict, or whether this is just another temporary change in tone.
Oil is headed for a glut again as recovering Middle Eastern oil flows, rising production from other countries and weak demand have pushed global supply above consumption, JPMorgan said in a report on Friday, estimating a surplus of 1.1 million barrels per day in September, widening to 1.4 million bpd in October.
Separately, the Iran-aligned Houthis said they were responsible for an attack on Saudi Aramco's offices in Riyadh on Sunday.
Elsewhere, Russia's Kirishi oil refinery was set on fire after a Ukrainian drone attack on the region on Monday, Governor Alexander Drozdenko said.
(Reporting by Enes TunagurAdditional reporting by Helen ClarkEditing by David Goodman)