Crude oil prices started the week with a slide, moving down to the lowest in a week on renewed hopes about a diplomatic resolution of the war in the Middle East, despite the absence of any evidence that there is willingness for negotiations on either side.
At the time of writing, Brent crude was trading at $102.05 per barrel, and West Texas Intermediate was changing hands for $98.50 per barrel, as traders pinned their hopes on a UN meeting this week, despite the fact that Washington and Tehran traded fresh threats this weekend.
The U.S. president threatened Iran with economic collapse and regime failure unless it agreed to make a deal, to which Iran responded with a threat of its own, saying it would give a harsh response to any U.S. attack, according to a Reuters report from earlier today.
Meanwhile, the Yemeni Houthis have escalated their offensive against Saudi Arabia, hitting a number of targets in the country over the weekend, including the capital, Riyadh. This should have been bullish for oil as the war expands and escalates in two of the world’s biggest oil chokepoints, but hope, once again, has taken the upper hand—even though there is little basis for it.
“It seems that a degree of risk premium is being removed from oil prices on hopes that a diplomatic path to de-escalate the US-Iran war may arrive this week,” KCM Trade chief market analyst Tim Waterer said today, as quoted by Reuters. “Whether that hope proves to be warranted or not is another question. Time will tell.”
In some much-needed positive news for oil markets, Saudi Arabia has managed to redirect its oil flows, achieving a daily export rate via the Strait of Hormuz of 2.9 million barrels daily over the past week, according to JP Morgan. That compares to 700,000 barrels daily in August, the bank noted.
By Irina Slav for Oilprice.com
