Oil prices dropped in early Asian trade on Tuesday after President Trump said he had paused a planned military strike on Iran to allow negotiations to continue.
At the time of writing, Brent front-month futures were trading at $109.70 per barrel, down 2.11%, while West Texas Intermediate front-month futures were changing hands at $102.80, down 1.55%.
The decline comes after oil prices surged on Monday due to drone strikes on the UAE and Saudi Arabia after the Trump-Xi summit had failed to produce any breakthrough on reopening the Strait of Hormuz.
In a social media post on Monday afternoon, Trump claimed that the planned attacks on Iran had been postponed at the request of the leaders of Saudi Arabia, Qatar, and the UAE. He then went on to suggest that “serious negotiations are now taking place”, although it remains to be seen if his comments will result in any tangible development. The announcement came with its usual threat, with Trump adding that a full-scale attack could still be carried out at a “moment’s notice”.
Iran’s Foreign Ministry confirmed on Monday that Tehran had communicated its position to Washington through Pakistan, although there are limited details on how negotiations are progressing.
Adding to downward pressure on oil prices, the U.S. Treasury secretary extended a sanctions waiver that allows certain countries to continue purchasing Russian seaborne oil for another 30 days.
While the latest pullback reflects the market’s ongoing hopes for de-escalation, prices will continue to trend higher unless more oil is able to pass through the Strait of Hormuz in the coming weeks.
By Josh Owens for Oilprice.com
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