WASHINGTON: Oil has extended its biggest weekly drop since April 2020 as traders weighed diplomatic efforts to end the US-Iran conflict against fresh attacks in the region.
Brent front-month futures fell below US$98 a barrel after losing more than 16% last week, while West Texas Intermediate was near US$91. Crude has tumbled from a six-month high at the end of October after a Democratic sweep of US mid-term elections boosted expectations that there won’t be a serious escalation in the conflict.
US Secretary of State Marco Rubio played down chances of a breakthrough in talks on ending the conflict with Iran, saying Tehran’s demands to date are unacceptable and in some cases “outrageous and ridiculous”.
The comments contrasted with Donald Trump’s tone after CNN cited the president earlier last Sunday as saying it’s “highly unlikely” he’ll order more strikes if negotiations make substantial progress.
Months of stop-and-go talks have failed to produce a resolution to the conflict that has hampered energy exports out of the Persian Gulf.
The Democratic sweep in the United States may not make a breakthrough more likely, said Jorge Leon, head of geopolitical analysis at Rystad Energy AS.
“More pressure for a deal doesn’t necessarily mean a deal is closer,” Leon said. “If we see renewed escalation, much of last week’s oil price decline could quickly reverse.”
Meanwhile, flareups continued in the Middle East.
A tanker was reported to have been hit by an unknown projectile over the weekend while transiting outbound through Hormuz, according to UK Maritime Trade Operations.
Also in the region, Iran-backed Houthi rebels in Yemen damaged the offices of state oil giant Saudi Aramco in Riyadh in an attack, prompting the Organisation of the Petroleum Exporting Countries (OPEC) member’s forces to retaliate by destroying two missile launchers.
Despite frequent assaults on vessels transiting Hormuz, there has been a revival in crude exports from the Persian Gulf to near pre-war levels.
Output from OPEC last month rose to 88% of the volume the same members pumped in February, according to a Bloomberg survey.
However, Iranian production had tumbled due to a US naval blockade. — Bloomberg
