Oil prices dropped by over 10 a barrel on 10th March following an almost four-year peak in the previous session after U.S. President Donald Trump indicated that the war in the Middle East might end shortly, and that the oil supply would not be affected by the war for long.
By 1504 GMT (11:04 a.m. EDT), the price of Brent futures had fallen by 10.45, or 10.6%, to stand at 88.51 a barrel, and U.S. West Texas Intermediate (WTI) crude had fallen by 10.61, or 11.2%, to 84.16.
On Monday, the oil topped over $119 a barrel since mid-2022 due to the oil supply decreases by Saudi Arabia and other producers, raising the fears of significant disruptions in the world’s supplies.
They were later deflated with Trump and Russian President Vladimir Putin having a call, exchange of proposals in a bid to have a rapid resolution of the war, according to a Kremlin aide.
In an interview with CBS News on Monday, Trump expressed the opinion that the war against Iran was almost over and Washington was “far beyond” the four- to five-week time frame he had estimated.
“Obviously, the markets have been pacified by the remarks by Trump about the short-lived war. Although we believe that there is overreacting on the downside today, there was overreacting on the upside yesterday,” according to Suvro Sarkar, team head of the energy sector at DBS Bank.
The war will not instantly trigger a recovery in oil supplies, even if the war ends, which is what Simon Flowers, the chairman and chief analyst, said at Wood Mackenzie.
Flowers says, “once the conflict is over, it will not be fast to crank up the supply chain. Storage of product barrels at refineries or on port could be transferred on vessels rather rapidly. However, in the case of a long shut-in of wells, it might take weeks or even longer to come up to full production.”
Islamic Revolutionary Guards Corps, as a response to Trump, declared that Tehran would not permit “one litre of oil” to be exported out of the region unless U.S and Israeli attacks were ceased, state media reported on Tuesday.
In the meantime, Trump is weighing lifting the oil sanctions on Russia and emergency crude reserves to prevent the spiking prices, as reported by several sources.
“The talk of relaxing restrictions on Russian energy, the words of Donald Trump suggesting that the war might eventually subside, and the fact that G7 nations might tap into their strategic oil reserves were all pointers to the same statement, namely, that barrels of oil would somehow make it to the market,” Priyanka Sachdeva, a Phillip Nova analyst, said in a note.
In a call on Tuesday, G7 energy ministers fell short of agreeing on a release of strategic oil reserves.
Aramco, the largest oil exporter in the world based in Saudi Arabia, stated on Tuesday that there would be a “disastrous impact” on the oil markets in the world in case the war in Iran persists to disrupt shipping in the Strait of Hormuz.
JPMorgan said in a note, “policy measures would not make much difference to the oil prices unless the safe passage through the Strait of Hormuz is guaranteed, because it would lose up to 12 million barrels a day within the next two weeks.”
In the most recent crisis to hit the world’s supplies, Abu Dhabi state oil giant ADNOC has closed its Ruwais refinery, a source said on Tuesday, after a fire broke out at a plant in the complex following a drone attack.
Goldman Sachs explained that since the situation is volatile, it was not altering its Brent and WTI oil price predictions in the fourth quarter to 66 per barrel and 62 per barrel, respectively.
