The major crude oil grades fell more than 7 per cent on Monday, settling at their lowest levels in over a week, after the United States abruptly suspended a campaign of air strikes against Iran.
Brent crude futures declined by $8.42 or 8.7 per cent to settle at $88.36 a barrel, while the US West Texas Intermediate (WTI) crude futures shrank by $6.70 or 7.5 per cent to close at $82.61 per barrel.
Brent futures last week surpassed $100 a barrel as the conflict, which has reduced oil shipments via the Strait of Hormuz, spilt over to the Red Sea. This hindered exports from the world’s top exporter, Saudi Arabia, via the Bab el-Mandeb strait to Asia.
However, Iran said it had halted retaliatory attacks against American allies in the Middle East as the US refrained from attacking Iran for the second night in a row.
The overnight lull in attacks came ahead of a key meeting scheduled in Washington between President Donald Trump and Israeli leader Benjamin Netanyahu.
The visit is scheduled for Tuesday, exactly five months since US and Israeli forces launched a wide campaign of air strikes on Iranian targets.
Iran has pushed back, attacking US allies in the Middle East and essentially closing the Strait of Hormuz, the chokepoint waterway through which a massive amount of oil and gas normally passes en route to global markets.
President Trump on Monday said the US is holding “good talks” with Iran, and that “there’s a good chance that something could happen” in regard to a potential deal. He also threatened “strong military action” if diplomacy fails.
Saudi Arabia’s air defences intercepted and destroyed drones launched from Iraq as Yemen’s Houthis claimed they had targeted sensitive crude oil supply and transport sites linking eastern Saudi Arabia to the critical Red Sea oil export hub of Yanbu.
Shipping data from Kpler showed that fewer than 10 commodity vessels passed through the Strait of Hormuz daily during the weekend.
Also, ship traffic through the Bab el-Mandeb Strait fell on Sunday after Yemeni Houthis attacked Saudi oil installations along the Red Sea coast, although a third Chinese supertanker exited via the waterway.
Kazakhstan, among the world’s 10 biggest oil producers, has more than halved its daily oil output following the closure of the main exporting terminal in Russia’s Black Sea over drone attacks.