Oil edges lower as Trump plays down prospect of new US attacks on Iran

Oil fell on Monday after US President Donald Trump played down the prospect of new strikes on Iran, although supply disruption in the Strait of Hormuz remains in focus as attacks on ships continue.

Brent, the benchmark for two thirds of the world's oil, was down 1.83 per cent at $96.52 a barrel at 1.23pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was trading 1.30 per cent lower at $89.65 a barrel.

“Oil prices are coming under renewed selling pressure as markets increasingly price in the possibility of a diplomatic breakthrough between Washington and Tehran,” Noureldeen Al Hammoury, head of market insights and community engagement at Equiti Group, told The National.

“President Trump's indication that further strikes on Iran are unlikely, provided negotiation progress has accelerated the unwinding of the geopolitical risk premium.”

Mr Trump indicated he is not planning to resume war with Iran, as he faces calls to wind down the nine-month conflict following his party's defeat in last week's US midterm elections.

Mr Trump told CNN it is “highly unlikely” that he will again wage war with Iran as long as there is progress in negotiations over Tehran’s nuclear programme and reopening the Strait of Hormuz.

“It’s highly unlikely I’ll have to,” he said. “They’re withering away financially. We’ve hit them militarily. We could finish them off.”

01:18

How low can oil go? UBS Wealth Management's chief economist on postwar prices

Qatar's Prime Minister, Sheikh Mohammed bin Abdulrahman, is expected to meet Mr Trump at the White House on Monday, raising hopes of a breakthrough in the talks.

The developments come as attacks on ships in the Strait of Hormuz continue to disrupt crude flows through the key Arabian Gulf channel.

About 20 per cent of global oil and liquefied natural gas shipments passed through the Strait of Hormuz before the conflict broke out on February 28, making the waterway one of the most important chokepoints for global energy supply.

Iran’s Islamic Revolutionary Guard Corps said on Sunday that three oil tankers had exploded and caught fire in the strait, after breaching Iranian regulations and using what it called unauthorised shipping routes.

“Brent is expected to face further downward pressure towards the $90–$95 range under a sustained de-escalation scenario,” Mr Al Hammoury said.

However, continued attacks on regional infrastructure and uncertainty surrounding negotiations could quickly reverse sentiment, he said.

“The bigger question is no longer just whether oil supplies will recover, but whether global demand can absorb those additional barrels once they return to the market,” he added.

Investors are watching Saudi Arabia closely, after Houthi rebels launched new attacks on the capital Riyadh, including on King Khalid International Airport, Aramco oil storage sites and the city's financial centre, claiming the strikes caused significant damage.

Any disruption to output from Opec's biggest oil producer could push prices higher on supply concerns.