Oil falls as report says Trump to give Iran diplomacy more time - The Straits Times

The price of diesel displayed on a fuel pump at a petrol station in Pennsylvania, US, on Oct 20.

Oil dropped after a report said US President Donald Trump wants to give diplomacy more time before deciding whether to resume strikes on Iran following the Nov 3 midterm elections.

Brent slipped towards US$111 a barrel after jumping more than 2% on Oct 30, while West Texas Intermediate was near US$102.

Trump told Benjamin Netanyahu of his preference for diplomacy in a phone call, a strategy that concerned the Israeli Prime Minister, Axios reported, citing sources it did not name.

The two countries started the war in late February with joint attacks on Iran.

On Oct 31, US Secretary of State Marco Rubio said no decision had been made on fresh strikes and that Trump prefers a diplomatic resolution.

The push for talks tempered concerns about renewed hostilities even as attacks on vessels around the Strait of Hormuz continued.

The global benchmark rallied in October, hitting a six-month high despite a revival of crude flows through Hormuz.

While Trump said last week that peace talks were under way, he has repeatedly threatened to resume strikes on Iran after the midterms.

On Oct 29, a top commander briefed the US President on military options, the Wall Street Journal reported.

“This is a temporary pullback” in prices, said Florence Schmit, a senior energy strategist at Rabobank.

Current rhetoric suggests further escalation in the Middle East is possible and could drive oil higher, she added.

Iran’s Supreme Leader Mojtaba Khamenei ordered his top military commanders to prepare for renewed confrontation with the US and Israel, even as his foreign minister signalled progress in diplomatic talks.

An Iranian delegation was in Qatar for discussions with mediators on Oct 31.

On Nov 1, UK Maritime Trade Operations (UKMTO) said it received a report that a ship had been struck by a projectile in Hormuz, following an attack on a liquefied natural gas tanker on Oct 30.

UKMTO also reported a vessel was struck east of Ras Al Khafji, Saudi Arabia, deep inside the Persian Gulf.

While crude exports from the Persian Gulf are near prewar levels, oil product shipments remain constrained.

The Middle East conflict, along with escalating Ukrainian attacks on Russian refiners, has helped drive fuel prices higher.

Diesel prices have surged in the US and Europe.

Against that backdrop, Goldman Sachs Group raised its Brent forecast to US$105 a barrel for December and an average of US$88 in 2027, citing heightened geopolitical supply risks.

“The Mid-East and Russia-Ukraine conflicts, alongside broader geopolitical fragmentation, create high disruption risk,” analysts including Daan Struyven and Yulia Grigsby wrote in note. 

Separately, OPEC+ agreed over the weekend to keep output quotas unchanged in December after unwinding the last of its voluntary cuts in September.

The move is largely symbolic, given that hostilities in the Middle East, including in the Red Sea, continue to threaten exports and production facilities. BLOOMBERG