Crude oil prices posted sharp losses on Monday, falling to their lowest levels in more than eight days after the United States’ surprise decision over the weekend to suspend its air campaign against Iran. The development revived hopes for a diplomatic de-escalation that could allow shipping through the Strait of Hormuz to resume.
Brent crude futures fell by $8.42, or 8.7%, to settle at $88.36 per barrel, their lowest level since July 17. Meanwhile, US West Texas Intermediate (WTI) crude dropped by $6.70, or 7.5%, to close at $82.61 per barrel, its lowest level since July 16.
It is worth recalling that last week Brent had climbed above $100 per barrel as the conflict expanded from the Strait of Hormuz to the Red Sea, significantly restricting oil exports through key maritime routes. The situation particularly affected Saudi Arabia, the world’s largest crude exporter, by disrupting shipments to Asia through the Bab el-Mandeb Strait.
The shift in the US stance and Trump’s remarks
US Ambassador to the United Nations Mike Waltz told Fox News Sunday and other American media outlets that President Donald Trump decided to temporarily halt US strikes in order to give diplomacy more time.
Donald Trump himself said on Monday that the United States is engaged in “good talks” with Iran and that “there is a very good chance” of reaching an agreement. At the same time, he warned that if negotiations fail, Washington is prepared to take “strong military action.”
Throughout the trading session, oil prices continued to decline despite Saudi Arabia’s air defenses intercepting drones launched from Iraq. At the same time, Yemen’s Houthis announced that they had struck critical oil supply and transportation facilities linking eastern Saudi Arabia with the port of Yanbu on the Red Sea.
Markets remain cautious
“The market seems to be constantly searching for good news in a region that continues not to provide it,” commented PVM analyst John Evans.
As he explained, the temporary suspension of military operations is certainly a positive development, but it does not guarantee that oil flows will be restored anytime soon. In his view, prices will continue to decline only if the elevated levels seen in recent weeks materially curb demand, rather than because of “questionable small ceasefires.”
Oil supply remains constrained
Market analysts believe oil prices will continue to experience significant volatility as investors assess every new development surrounding the informal ceasefire between the United States and Iran. At the same time, they point out that actual oil flows remain significantly reduced.
Alex Hodes, Head of Energy Market Strategy at StoneX, noted that maritime traffic remains exceptionally low following the temporary June ceasefire, forcing Saudi crude shipments to take longer and more expensive routes via the Suez Canal.
According to Kpler data, fewer than 10 tankers per day transited the Strait of Hormuz over the weekend.
SEB Research analyst Ole Hvalbye estimated that oil flows have fallen to roughly 15% of pre-war levels, compared with a normal volume of around 20 million barrels per day of crude, condensates, and petroleum products.
“A political pause does not add a single extra barrel of oil to the global market at this moment,” he stressed.
New disruptions in the Red Sea and Kazakhstan
Meanwhile, vessel traffic through the Bab el-Mandeb Strait declined further on Sunday following Houthi attacks on Saudi oil facilities along the Red Sea coast, although a third Chinese supertanker managed to exit the waterway.
At the same time, Kazakhstan, one of the world’s ten largest oil producers, cut more than half of its daily output after the temporary shutdown of the main export terminal operated by the Caspian Pipeline Consortium (CPC) on the Black Sea due to drone attacks.
Later, however, Kazakhstan’s Ministry of Energy announced that the CPC terminal on the Black Sea had resumed normal oil loading operations.
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