Oil prices fell in early Monday trading after U.S. President Donald Trump said new strikes against Iran were highly unlikely if negotiations produce what he called a strong agreement.
Brent crude futures for January delivery fell 84 cents, or 0.85%, to $97.48 a barrel by 1:38 a.m. GMT. U.S. West Texas Intermediate crude declined 32 cents, or 0.35%, to $90.51.
Brent lost 17% last week, its steepest weekly decline since the start of the COVID-19 pandemic, according to LSEG data.
Markets Reduce the Geopolitical Risk Premium
In a telephone interview with CNN, Trump said the need for further attacks would depend on whether Tehran signs a “very strong agreement.” He said it was highly unlikely that renewed strikes would be necessary if the talks make progress.
The U.S. president did not rule out military action. He said Washington had identified infrastructure targets in case operations resume. Iran has warned that it would respond to new attacks by striking U.S. and Israeli targets.
The decline in oil prices therefore reflects expectations of de-escalation rather than an end to the conflict. Continued incidents involving shipping in and near the Strait of Hormuz remain a major risk for regional oil exports.
Supply Recovery Adds Downward Pressure
Oil prices are also being pressured by improving supplies and weak demand. JPMorgan estimates that global production exceeded consumption by 1.1 million barrels per day in September, with the surplus widening to 1.4 million barrels per day in October.
The bank linked the shift to recovering Middle Eastern exports, increased production in other regions and weaker global demand.
For Azerbaijan, an oil-exporting country, a lower Brent price directly affects the value of crude exports. The market’s reduced geopolitical premium is weighing on prices, although risks surrounding the Strait of Hormuz have not disappeared.
Source: Vesti Baku, with market figures and reporting attributed to Reuters, LSEG and JPMorgan.