Oil Falls After Monthly Gains as Geopolitical Fears Fade

SadaNews - Oil prices plunged after recording their largest monthly gains since 2022, as geopolitical risk premiums diminished following U.S. President Donald Trump's announcement that Washington is engaged in talks with Iran.

Brent crude was trading near $67 a barrel after rising 16% last month, while West Texas Intermediate crude held above $63.

Trump downplayed Iranian Supreme Leader Ali Khamenei's threats of a regional war over the weekend, reiterating his optimism about the possibility of reaching an agreement.

Harris Khurshid, chief investment officer at Karobar Capital, stated that "the downward move seems more like a repositioning in the market rather than a shift in fundamentals."

He added, "In the absence of a new supply shock, oil is giving up part of the risk premium as the market reassesses after pricing in near-term disruptions that did not materialize."

Geopolitical Developments and Commodity Markets

Ukrainian President Volodymyr Zelensky announced that the upcoming trilateral meetings between the United States, Russia, and Ukraine will be held on February 4 and 5 in Abu Dhabi. Previous talks have not made significant breakthroughs to end the war, which will soon enter its fifth year and has led to sanctions on Russian oil trade.

Oil prices had risen after weeks of escalating tensions that brought Iran and the U.S. to the brink of conflict, following threats Trump made in January to strike due to Iran's bloody crackdown on protests.

This led to increased risks of supply disruptions in the region, which accounts for about a third of the world's crude production, shifting focus away from a growing global glut.

In contrast, the OPEC+ alliance has maintained its plans to freeze production levels in March, the last month of a three-month freeze previously announced by the alliance, even after the recent rise in prices.

Traders also monitored a sharp correction in precious metals, as gold and silver prices continued one of the worst declines in history. Silver dropped 26% last Friday, while gold fell 9%.