Oversupply concerns add to downward pressure

A pump jack operates near Bakersfield, California (California's 22nd Congressional District), on Oct. 16 (local time). [AFP]
A pump jack operates near Bakersfield, California (California's 22nd Congressional District), on Oct. 16 (local time). [AFP]

Global oil prices tumbled Monday (local time) after US President Donald Trump suggested further military strikes against Iran were unlikely, easing fears of supply disruptions in the Middle East.

West Texas Intermediate crude for December delivery settled at $86.85 per barrel on the New York Mercantile Exchange, down $3.98, or 4.38 percent, from the previous session.

Brent crude for January delivery, the global benchmark, tumbled $5.75, or 5.85 percent, to close at $92.57 per barrel. Brent extended its losses after the close of regular trading, falling more than $7 below the previous session's level — its lowest since late August.

Prices fell as Trump played down the prospect of additional military action against Iran, reducing concerns about potential crude supply disruptions in the Middle East.

In a phone interview with CNN on Monday, Trump said, given a deal between the two sides, "there's very little chance" he would need to resume military strikes against Iran. Whether a deal with Iran was achievable remained unclear — the country has not abandoned its nuclear program or its grip on the Strait of Hormuz even more than eight months into the conflict. Still, Trump's remarks were seen as tilting against a resumption of military action.

Energy market analysis firm TAC Energy said the comments appeared to have fueled selling pressure. "Actual hostilities are not slowing down, but expectations for the possibility of peace seem to have encouraged the sell-off," it said.

Weakness in the physical crude market and oversupply concerns also weighed on prices.

Morgan Stanley said in a report Monday that supply-demand conditions in the physical crude market were deteriorating. JPMorgan estimated in a report last week that global crude supply exceeded demand by about 1.4 million barrels per day in October.


yckim6452@heraldcorp.com