Brent crude futures dipped into the $93-a-barrel handle early Monday morning, extending last week's selloff, the largest weekly decline since April 2020, while WTI traded near $87.37 a barrel.
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Continued diplomatic signals outweighed a wave of regional violence over the weekend, including a Houthi missile strike on a Saudi Aramco office tower in Riyadh's financial district, tanker attacks in the Strait of Hormuz, US forces disabling a vessel in the critical waterway, and US strikes on Iranian air-defense equipment on Qeshm Island.
President Trump on Sunday finally got the memo after the GOP's disastrous midterm.
Trump remarked Sunday that it is "highly unlikely" he will need to order US forces to war with Iran as long as there is progress in negotiations. Indirect talks are currently happening via Qatari and Gulf mediation.
"It depends on whether or not they sign a very strong agreement," Trump told CNN's Jim Sciutto in a phone interview. Then the president explained:
"The answer is highly unlikely it's going to be necessary. They're a failing nation. It just came out, you saw this year, 301% inflation. Highly unlikely it will be necessary. I would if necessary, but we hit them really hard. I hit them so hard. You don't know how hard I hit them."
Diplomatic signals mixed after Secretary of State Marco Rubio described some Iranian demands as "outrageous and ridiculous."
Commonwealth Bank of Australia commodities analyst Vivek Dhar said that any US-Iran deal to lift the Hormuz blockade could send Brent down to the $70 to $85 levels. He noted that Brent was still holding a slight war risk premium into the new week after much of it evaporated last week.
Last Thursday, UBS energy expert Dominic Ellis wrote that even with the rapid unwind of the geopolitical risk premium in Brent, there's still going to be a floor in Brent because of the "near 700 mn drawdown in global inventories as a result of the conflict so far and the at least 40-50mb ongoing monthly inventory draw if the conflict continues will drive incremental demand that keeps a floor on oil for the next 18-24 months."
US distillate stockpiles fell below 100 million barrels for the first time since 2003.
The good news for US drivers ahead of Thanksgiving is that the national average for gasoline at the pump, tracked by AAA, is about to drop below the politically sensitive $ 4-a-gallon level.
Traders are monitoring Ukrainian strikes on Russian refineries ahead of US-mediated talks in Abu Dhabi on Tuesday. This will be a three-way meeting between Washington, Moscow and Kiev.