Brent Falls Below $90 for the First Time Since August as Trump Signals End to Iran War

The international benchmark fell as much as $2.39, or 2.58%, to $90.18 a barrel by 0930 GMT after briefly trading under $90, according to Reuters. By 1.33pm UAE time it was at $90.32, while US West Texas Intermediate was 2.27% lower at $84.77, The National reported. Brent had already settled 5.85% lower on Monday.

The move is a sharp reversal for a market that priced in a prolonged disruption to Gulf supply only a fortnight ago. Brent has retreated about 23% from the six-month high of $118 it reached on October 30, when traders feared Washington would step up attacks on Iran after the US midterm elections. For Gulf producers and importers alike, the drop resets the price assumptions behind budgets, fuel costs and shipping contracts that had been built around a war premium.

Trump's Remarks

Trump spoke at the White House on Monday after meeting Qatar's Prime Minister Sheikh Mohammed bin Abdulrahman. "At this point, taking the military action doesn't seem to be a very necessary thing … I think it's going to be ending fairly soon," he said. He said he would hold off on new strikes after appeals from countries in the region, including Qatar, but would keep the US naval blockade in the Strait of Hormuz in place for now.

"The market continues to prioritise President Trump's more conciliatory tone toward Iran since the midterms," said Tim Waterer, chief market analyst at KCM Trade. "While attacks on shipping around the Strait of Hormuz are still occurring, they have not escalated in a way that has forced a fresh risk premium into the market."

The $90 level had been seen as a floor by some analysts. Gregory Brew, a senior analyst at Eurasia Group, wrote in a note before Tuesday's break below it that Brent was unlikely to fall under $90 "without more durable signs of de-escalation and a US-Iran deal". He added that shipping risks remained high because Iran continues to attack vessels moving through the strait.

Signs of Oversupply

Physical market indicators are also pointing lower. Dated Brent, against which roughly two thirds of global oil supply is priced, has weakened in recent weeks, and some analysts say high prices have cut demand enough to tip the market back towards surplus. JPMorgan estimated the global surplus at about 1.4 million barrels per day in October, in a report last week.

Supply from the Gulf has been rising despite export constraints. OPEC output increased in October, led by Saudi Arabia, Kuwait and Iraq, according to a Reuters survey. Liquefied natural gas tankers leaving the Strait of Hormuz also reached their highest level of the war in October, ship-tracking data published on Tuesday showed.

The drop in crude fed through to other markets. US petrol prices have fallen below $4 a gallon for the first time since August, and global equities rose on Tuesday on hopes of a US-Iran settlement.

Traders will next watch whether Washington and Tehran turn Trump's remarks into formal talks, and whether the US keeps the Hormuz blockade in place, which Trump has said it will for now.