Brent Crude Falls Near $105 on US-Iran Talks
Oil prices fell after reports of a gradual deal between Washington and Tehran, while a Houthi attack on Yanbu in Saudi Arabia is keeping the drop in check.
A barrel of Brent crude for November delivery cost $104.97 this morning, down 1.53% from the previous day, according to figures Tanjug published at 9:52 a.m. local time. US crude, WTI, fell 2.21% at the same moment, to $92.52 a barrel.
Later in the morning, Trading Economics recorded slightly different numbers: Brent at $105.46, down $1.14, or 1.07%. The gap between the two sources is not an error, just a result of the different moments each measurement was taken, a normal feature of a market that shifts minute by minute. On Europe’s gas market, the TTF futures contract traded at 75.3 euros per megawatt hour this morning, while European stock exchanges were, according to Tanjug, mostly in positive territory.
Why oil is getting cheaper
The drop follows reports that American and Iranian negotiators are discussing a gradual agreement in New York, with Qatar mediating on the sidelines of the United Nations General Assembly. According to a Trading Economics analysis, such a deal could reopen the Strait of Hormuz to unrestricted tanker traffic and lift the US blockade on Iranian ports. Both moves would increase the global oil supply, which explains why the mere announcement of talks, without a single signature yet, was enough to push the price down.
Oil importers stand to gain from that scenario, since a larger supply typically pushes prices lower over the long run. The losers would be Iranian and other regional exporters, who are currently selling at a premium because of the risk in the Strait of Hormuz, a premium that would disappear once the strait reopens.
Houthi attack keeps the price from falling further
The decline was softened by an attack from Yemen’s Houthi rebels, who fired missiles at the Saudi cities of Yanbu and Taif. Yanbu is a key oil export terminal on the Red Sea, so any attack near it injects a risk premium into the price, working against the news out of New York. The combination of these two forces, easing on the Iran-US front and threats on Saudi Arabia’s Red Sea coast, has kept Brent in a $105 to $107 range all week.
Despite this morning’s drop, Brent is still up for the week, with gains of more than 2%. Whether the price breaks below $105 or climbs back toward $107 will depend on the outcome of the talks in New York and on whether the Houthis strike the Yanbu terminal again.
