Brent crude futures fell below $90 a barrel on Tuesday for the first time since August 31, extending a sharp sell-off after US President Donald Trump downplayed the need for additional military action against Iran and said the nearly nine-month war could end fairly soon. By 1334 GMT, Brent was down $2.92, or 3.15 per cent, at $89.65 a barrel, while US West Texas Intermediate (WTI) futures fell $2.33, or 2.68 per cent, to $84.52, Reuters reported. Earlier in the session Brent traded as low as about $89.20 and, in early US trade, was down 2.9 per cent at $89.92 with WTI at $84.60, according to CNBC's market reporting.

Source: Reuters

The break below $90 follows this morning's earlier fall in Asian trade, when Brent dropped to $91.56 as Trump first held off new Iran strikes. Read the earlier report

A two-day slide of more than 8 per cent

Tuesday's fall builds on Monday's session, in which Brent settled 5.9 per cent lower at $92.57 after Trump, following White House talks with Qatar's prime minister and appeals from Gulf states including Qatar, Saudi Arabia, the United Arab Emirates, Bahrain and Kuwait, said he would hold off fresh strikes, called renewed military action "quite unlikely" and said Iran was, in his words, militarily "effectively over". Brent has now retreated about 23 per cent from the six-month high of $118 it touched on October 30, when markets feared Trump might step up attacks on Iran after the US midterm elections, Reuters reported; OilPrice.com put the fall from the late-October peak above $117 at about 25 per cent.

Source: Reuters

What traders are pricing in — and what has not changed

"The market continues to prioritise President Trump's more conciliatory tone toward Iran since the midterms," Tim Waterer, chief market analyst at KCM Trade, told Reuters. "While attacks on shipping around the Strait of Hormuz are still occurring, they have not escalated in a way that has forced a fresh risk premium into the market." No agreement between Washington and Tehran exists: Trump has kept the US naval blockade of Iranian ports in place, said US forces remain "locked and loaded" if talks fail, and Iranian officials have disputed that negotiations are under way. Houthi attacks on Saudi energy infrastructure, including the East-West pipeline, are also continuing.

Source: Reuters

Oversupply is adding to the pressure

Beyond the war headlines, analysts say the physical market is loosening. JPMorgan estimated a global oil surplus of around 1.4 million barrels per day in October, and a Reuters survey found OPEC oil output rose in October, led by gains in Saudi Arabia, Kuwait and Iraq, despite continued constraints on exports; the dated Brent benchmark, against which roughly two-thirds of the world's oil supply is priced, has weakened in recent weeks. On the demand side, official data on Tuesday showed China's October crude oil imports rose to their highest since March, after the country sharply cut imports while the US-Israeli war on Iran disrupted Middle East supplies.

Source: Reuters

Why it matters, and what happens next

Oil remains well above the roughly $60 a barrel Brent traded at near the start of the year, so fuel costs worldwide — including in India, which imports most of its crude, and for Punjabi and Indian workers and businesses across the Gulf — are still far above pre-war levels even after this week's slide. What happens next depends on whether Trump's restraint turns into a deal that reopens the Strait of Hormuz and restores Iranian exports: a breakthrough would typically push prices lower still, while a breakdown in talks or a fresh strike could return the risk premium quickly. Sources: Reuters; CNBC; OilPrice.com.

Source: OilPrice.com