Oil prices fell to their lowest level in a week on Monday amid hopes that building diplomatic momentum during the UN General Assembly in New York this week could help end the US-Iran conflict that continues to mar global energy dynamics.
Brent was down 2.12 per cent to $101.67 a barrel at 8.30am UAE time. The benchmark for two-thirds of the world's oil dropped for the fourth consecutive session. West Texas Intermediate, the gauge that tracks US crude, slipped 2.24 per cent to $98.05 per barrel.
“It seems that a degree of risk premium is being removed from oil prices on hopes that a diplomatic path to de-escalate the US-Iran war may arrive this week,” Reuters cited Tim Waterer, chief market analyst at KCM Trade, as saying.
“Whether that hope proves to be warranted or not is another question. Time will tell.”
On Sunday, US President Donald Trump said he was considering three options for ending the war with Iran: “Wiping Iran out”, allowing it to “rot economically”, or reaching a deal.
In remarks to Fox News, Mr Trump, who acknowledged Washington has received a list of demands from Tehran to end the war, said he was open to meeting Iranian President Masoud Pezeshkian, who will be travelling to New York for the UN General Assembly beginning on Tuesday.
There’s no indication whether Tehran is also open to a US-Iran presidential meeting during the UNGA.
Mr Trump is also meeting with Gulf officials in New York this week amid intensifying high-stakes US-Arab diplomacy. The meeting will likely include representatives of Iraq, Jordan and Egypt amid calls to initiate dialogue with Tehran.
The talks during the UNGA are expected to cover several issues with a focus on Iran and its proxies in the region, as well as the future of its conflict with the US.
Saudi pipeline disruption
Meanwhile, missile and drone attacks last week forced Saudi Arabia to shut its East-West pipeline, removing a crucial route for exporting crude.
Markets are eagerly awaiting updates from Saudi Aramco, the biggest oil-exporting company in the world, on the progress to restore supply through the pipeline.
The disruption and halting of crude loading operations on the Red Sea coast have forced Aramco to suspend the supply of crude to its European customers next month.
However, Julius Baer's head of economics and next generation research, Norbert Rucker, said: "Now that a week has passed since the pipeline attack in Saudi Arabia, there is more evidence that the supply disruption is less significant than feared."
"The oil market is not running out of oil," he added in a research note on Monday.
Striking a balance between fundamentals, the persistence of a risk premium, and the small odds of a diplomatic solution, Julius Baer has adjusted its near-term forecast to $77.50 per barrel, he said.
