West Texas Intermediate futures fell 1.8 percent to settle near $89 a barrel, while Brent closed around $100. Open interest in the front-month contracts for both benchmarks has trended lower in recent sessions as traders attempt to side-step geopoliticaldriven volatility stemming from the Iran war, contributing to exaggerated price moves. Over the weekend, Saudi Aramco lowered the price of Arab Light to buyers in Asia to $5 a barrel below a regional benchmark for November as Persian Gulf producers race for market share with flows through the Strait of Hormuz increasing.
That’s a six-year low and compares with a discount of $2 a barrel for this month. Traders and refiners had expected a $5 rise from October, a Bloomberg said, citing a survey. Traders also parsed a stream of headlines on the status of Hormuz, one of the biggest points of contention in the US-Iran conflict. Axios reported that top cabinet members met at Camp David last week to discuss next steps in the war, and the conflict in Yemen, citing three US officials. Iranian state media reported that the country’s interior minister departed for Doha on Monday for talks.
Crude has rallied strongly this year after the US and Israel attacked Iran in late Feburary, igniting months of conflict in the Middle East and fanning inflation. Still, flows of oil have been recovering toward pre-war levels in recent weeks, although shipments of products remain constrained. In a bid to tame prices, the Group of Seven and its partners last week announced a further release of emergency stockpiles.
Bullish risks endure. Yemen’s internationally recognised government launched a full-scale military campaign to recapture Houthi-held territory after weeks of escalating conflict between the Iran-backed group and Saudi Arabia, including targeting the kingdom’s energy infrastructure.
