Global oil prices tumbled Monday, extending a weeklong slide built on hopes that diplomacy may end the U.S.-Israeli war with Iran. Brent crude fell to around $93 a barrel, down roughly $20 since late October, while West Texas Intermediate dipped below $87. This decline reflects a new market equilibrium where global supply has finally caught up with demand.
Analysts at J. P. Morgan note this is the first time since the war started that the world pumped more oil than it used, beginning in September.
The return of physical surplus, combined with news of a potential U.S.-Iran agreement, is rapidly eroding the premium embedded in oil prices. Several factors have brought the market back into balance: more oil flowing from the Middle East, growing production elsewhere, and businesses finding ways to use less fuel. Mediators have presented proposals to the Trump administration and Iranian officials, postponing the prospect of new attacks.
Even after the slide, fuel remains much more expensive than when the war started, due to higher shipping costs, depleted inventories and damaged refineries. In the United States, the national average gasoline price was $4 a gallon Monday, down from $4.37 a month ago but still about $1 higher than a year ago. At $6.17 a gallon, diesel remains significantly more expensive.
Elevated prices have been a boon to oil companies whose profits soared during the war. President Trump considered strikes on Iran after last week's midterm elections, which saw Democrats take back both houses of Congress. Hostilities continue between Saudi Arabia and the Iran-backed Houthi militia in Yemen.
Despite recent declines, analysts caution that further military escalation remains possible in the coming weeks.
Source: New York Times Business · Summarized by HeadlinesBriefing