Oil prices fell on Monday morning amid hopes of a diplomatic breakthrough between the US and Iran, easing concerns about further supply disruption. US President Donald Trump reportedly said he wants to give diplomacy with Iran more time before considering renewed military strikes after Tuesday’s US midterm elections.
The two key benchmarks slid more than 3 per cent in morning trading. Brent, the benchmark for two thirds of the world's crude, was trading at $110 a barrel at 7.55am UAE time. West Texas Intermediate, the gauge that tracks US crude, dropped to $100.90 a barrel.
Mr Trump reportedly told Israeli Prime Minister Benjamin Netanyahu during a phone call that he wanted to give diplomacy with Tehran more time before considering further strikes, Axios reported, quoting sources.
CBS News reported that Mr Trump said he believed the US would soon end the war with Iran, "one way or the other". The US President was speaking to Right Side Broadcasting Network before a campaign rally in Iowa on Sunday, according to the report.
"We've had such a victory, and we'll put it away very soon, one way or the other," Mr Trump was quoted as saying. "Either they'll make a deal, or we'll just end it … The job we've done is amazing."
On Saturday, US Secretary of State Marco Rubio said no decision had been made on renewed strikes and that Mr Trump preferred a diplomatic resolution.
On Sunday, the UK Maritime Trade Operations said it received a report that a ship had been struck by a projectile in the Strait of Hormuz, after an attack on a liquefied natural gas tanker on Friday. The UKMTO also reported a vessel was struck east of Ras Al Khafji, along Saudi Arabia's Gulf coast.
An Iranian delegation was in Qatar for discussions with mediators on Saturday, according to a Bloomberg report.
Fears of US strikes on Iran have maintained upward pressure on crude, keeping supply risk premiums elevated.
Oil prices started sliding on Monday after hitting a six-month high last week on Hormuz strikes and a US threat to hit Iran. Over the past week, both Brent and WTI increased by about 0.8 per cent. On a monthly basis, the benchmarks surged by about 15 per cent and 12 per cent, respectively, to hit their highest levels since April.
Meanwhile, Swiss lender UBS said in a report recently it expected Brent crude prices to remain elevated, near $110 a barrel at the end of the year, as Middle Eastern supply remains volatile and geopolitical uncertainty persists.
"Record freight costs, constrained tanker capacity, and recovering Chinese imports are other factors likely to keep oil prices high," UBS commodity analyst Giovanni Staunovo said.
