Oil prices fell by more than one dollar a barrel on Monday as investors moved to take profits ahead of an expected announcement from Washington on new sanctions against Iran, which could cause further disruptions to oil supplies from the Middle East.
Brent crude futures dropped by $1.49, or 1.6%, to $92.90 a barrel, while US West Texas Intermediate crude declined by $1.74, or 2%, to $85.32 a barrel.
Both benchmarks posted gains for a second consecutive week last week, rising by more than 5% as peace talks between the United States and Iran reached a deadlock, restricting oil shipments through the Strait of Hormuz, a route that previously handled around one fifth of global supply.
US Treasury Secretary Scott Bessent is scheduled to hold a press conference on Monday amid threats to impose what Washington has described as the toughest sanctions in history on Iran. US President Donald Trump has also threatened sanctions against Iran’s trading partners.
Saxo Bank analysts said in a note that oil prices pulled back after a two week rally as traders awaited details of a US plan aimed at increasing Iran’s economic isolation.
Iran has condemned plans for additional US sanctions, while Iranian President Masoud Pezeshkian has called for a diplomatic solution to the conflict.
Tony Sycamore, an analyst at IG Markets, said the more pragmatic elements within Iran’s leadership may prefer to reduce tensions, while hardliners could choose to continue the confrontation. He added that by the end of the week, markets may gain a clearer view of which side holds greater influence within the Iranian leadership.
Offers of Iranian crude to Chinese buyers have declined while prices have risen, as the US blockade has reduced Iranian oil shipments, according to trading sources.
Iran, meanwhile, allowed several Iraqi oil tankers to pass through the Strait of Hormuz following repeated requests from Baghdad, according to Iran’s official IRNA news agency.
Some analysts expect the recovery of Middle East supplies to take longer than previously anticipated as tensions between the United States and Iran continue.
Morgan Stanley analysts said in a note that crude supply conditions have tightened, pointing out that recent weeks have seen one of the sharpest declines in oil volumes transported by sea, alongside falling onshore inventories, including in China.
The analysts added that lower supply remains the main driver, particularly from the Middle East. Several data sources indicate that total exports from the region have returned to levels last seen in March and April, prompting the bank to lower its expectations for the pace of supply recovery.
Shipping data showed that fewer than 20 commodity vessels passed through the Strait of Hormuz over the weekend as Iranian and US restrictions continued to limit navigation through one of the world’s most important energy shipping routes.
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