Oil falls as Trump predicts Middle East de-escalation

Oil prices fall after surging as high as $119 a barrel on Monday

Trump predicted the war in the Middle East could be over soon

G7 ready to act on oil surge but holds off tapping reserves

Oil prices fell on Tuesday after hitting an over three-year high in ‌the prior session as US President Donald Trump predicted the war in the Middle East could end soon, easing concerns about prolonged disruptions to global oil supplies.

Brent futures fell $4.17, or 4.2 per cent, to $94.79 a barrel at 03:45 GMT, while US West Texas Intermediate (WTI) crude was down $3.81, or 4pc, to $90.96 a barrel. Both the ​contracts fell as much as 11pc earlier before paring some losses.

Oil surged past $100 a barrel on Monday to hit its ​highest since mid-2022, as supply cuts by Saudi Arabia and other producers during the expanding US-Israeli war ⁠with Iran stoked fears of major disruptions to global supplies.

Prices later retreated after Russian President Vladimir Putin held a call ​with Trump and shared proposals aimed at a quick settlement to the Iran war, according to a Kremlin aide, easing concerns about a ​prolonged supply disruption.

Trump said on Monday in a CBS News interview that he thinks the war against Iran “is very complete” and that Washington was “very far ahead” of his initial four- to five-week estimated timeframe.

“Clearly, Trump’s comments about a short-lived war have calmed markets. While there was an ​overreaction to the upside yesterday, we think there is an overreaction to the downside today,” said Suvro Sarkar, energy sector ​team lead at DBS Bank, adding that the market is underappreciating risks at these levels for Brent.

“Murban and Dubai grades are still ‌well above $100 ⁠per barrel, so practically nothing much has changed in terms of ground realities,” he added, referring to benchmark Middle Eastern oil grades.

In response to Trump, Iran’s Islamic Revolutionary Guards Corps (IRGC) said they would “determine the end of the war,” and Tehran would not allow “one litre of oil” to be exported from the region if US and Israeli attacks continued, state media reported on ​Tuesday, citing the IRGC’s spokesperson.

Prices, however, remain under pressure as ​Trump considers easing oil sanctions ⁠on Russia and releasing emergency crude stockpiles as part of a package of options aimed at curbing spiking global oil prices, according to multiple sources.

“Discussions around easing sanctions on Russian oil, ​comments from Donald Trump hinting that the conflict could eventually de-escalate, and the possibility ​of G7 countries ⁠tapping strategic oil reserves all pointed to the same message - that oil barrels will somehow continue to reach the market,” said Phillip Nova analyst Priyanka Sachdeva in a note on Tuesday.

“Once traders sensed that supply routes could still be maintained, the initial ‘panic ⁠premium’ that ​had pushed prices above the $100 mark yesterday started to fade, and oil ​prices quickly pulled back.”

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