Key facts
- Oil prices are sliding after recently surpassing $100 a barrel.
- Brent crude fell 4% to approximately $99 a barrel on Monday.
- West Texas Intermediate crude dropped 5% to around $95 a barrel.
- US stocks and Treasury yields declined as oil prices retreated.
- Analysts cite surprisingly strong oil flows from the Middle East and potential US-Iran diplomacy for the price drop.
- US Central Command reported that oil and LNG shipments through the Strait of Hormuz reached a six-month high.
Oil prices have reversed their recent surge, falling back below $100 a barrel as market participants assess a potential de-escalation in Middle East tensions and continued robust supply. Brent crude, the international benchmark, dropped 4% to around $99 a barrel on Monday, while US West Texas Intermediate crude fell 5% to approximately $95 a barrel. This decline in oil prices coincided with a cooling of Treasury yields and a rise in US stock indexes. The S&P 500 was up 0.9%, the Dow Jones Industrial Average gained 0.5%, and the Nasdaq 100 rose 1.9% shortly after 11:00 AM ET on Monday.
Analysts attribute the recent slide to several factors. Firstly, despite concerns over supply disruptions in the Middle East, including a pipeline attack in Saudi Arabia, oil flows from the region have remained "surprisingly strong," according to JPMorgan. The bank's estimates show regional oil flows averaging 17.1 million barrels a day in the 10 days leading up to September 18. Furthermore, US Central Command reported that oil and liquefied natural gas shipments through the Strait of Hormuz have reached a six-month high. Additionally, oil demand is being partially met by strategic reserves, though these are dwindling.
Secondly, traders are factoring in the possibility of diplomatic progress between the US and Iran. President Donald Trump indicated openness to meeting with Iran's president, Masoud Pezeshkian, who is attending the United Nations General Assembly. HFI Research, an energy research firm, suggested that the upcoming diplomatic meetings could present an opportunity for a "leak of peace deals." However, not all analysts are bearish on oil prices. Matt Smith, director of commodity research at Kpler, anticipates prices will grind higher due to Middle East supply constraints, with a potential to reach $150 a barrel by 2027. Amrita Sen of Energy Aspects noted that while a pullback is occurring, the price floor for Brent crude has been rising throughout the year.