Oil Prices Drop Below $90 as Supply Risks Diminish

SadaNews -  Oil prices dropped as the United States halted the ongoing daily attacks on Iran, which had been taking place for nearly two weeks, and tanker ships set sail to load cargo from a recently disrupted major Kazakhstani crude oil export terminal, easing supply pressures in a market that has suffered from supply shortages due to various factors. 

Brent crude prices fell by more than 9% in London, declining to below $88 a barrel, just a few days after surpassing $100. West Texas Intermediate crude also decreased to near $82 a barrel, and European natural gas prices fell.

After 13 consecutive days of launching attacks on Iran to weaken Tehran's ability to target commercial vessels, it seems that the United States stopped its strikes late Friday without providing any explanation or official announcement. Neither Iranian media nor the government reported any new attacks during this period, according to Bloomberg. Meanwhile, Iran indicated its abstention from any retaliatory attacks and its discussions with Oman regarding the Strait of Hormuz.

The United States Remains Prepared Despite Halting Attacks on Iran

US President Donald Trump stated late Friday that the United States is "in full readiness" to carry out extensive strikes against Iran, expressing increasing frustration over Tehran's refusal to reopen the Strait of Hormuz. He added that he has not yet made a decision on proceeding with those strikes, having informed Axios a few days prior that he was considering a "wide-ranging attack".

This comes at a time when US Ambassador to the United Nations Mike Pence affirmed that the decision to defer was due to Trump's desire to give the Iran talks a "limited opportunity".

When a senior Trump administration official was asked on Saturday about this calmness, they stated that the president "has always been clear in his preference for diplomacy, but he has made it clear to Iran what will happen if they do not seriously come to the negotiation table," according to Reuters.

Iran Skeptical of Washington's Intentions

For his part, a senior Iranian source told Reuters on Sunday that Tehran will halt its attacks if the United States continues to suspend its strikes, but remains skeptical of Washington's intentions.

The source added, a day after Washington suspended its attacks: "Iran’s position remains reciprocal: if the attacks stop, Iran will also halt its operations... We conveyed this message to the United States".

He further stated: "There are more doubts than optimism regarding halting the attacks. The prevailing view is that this halt is tactical and not genuine," according to Reuters.

Oil futures prices remain elevated by about 20% this month, as the conflict between the United States and Iran extends beyond the Strait of Hormuz to the Red Sea, which has become a vital alternative route when the war disrupted flows via Hormuz. The conflict, now nearing its fifth month, has raised concerns of a global inflation shock, with declining inventories and skyrocketing fuel prices.

Sol Kavonik, chief energy analyst at MST Marquee, told Bloomberg: "The pause in strikes and reports of progress in talks strengthen the expectations of a return to de-escalation, which could lead to a recovery in flows." He added: "But there is a significant risk that any ceasefire may merely be a temporary truce." 

The Russia-Ukraine War Pressures Supplies

Disruptions in flows continued elsewhere. Russia's largest oil port on the Black Sea halted shipments for several days amid escalating Ukrainian drone attacks.

According to a report published by Bloomberg on July 25, the Shishkaris terminal in Novorossiysk has been offline since July 21.

Energy gains and their impact on economic growth, consumer spending, and inflation will be among the topics central bankers discuss this week.

In the United States, Federal Reserve officials will meet on July 28 and 29 to assess monetary policy.

Latest price movements: 

Brent crude futures for September settlement fell 9.2% to $87.86 a barrel by 11:03 AM in London.

WTI crude futures for September delivery also dropped 7.7% to $82.43 a barrel.