Oil prices recorded their largest one-day drop since late July after Washington and Tehran showed willingness to hold talks to resolve the Middle East conflict affecting energy supply. Brent fell 9.07 percent to 104.36 dollars per barrel. West Texas Intermediate fell 7.36 percent to 96.46 dollars per barrel, and Mexican Mix fell 14.57 percent to 91.25 dollars per barrel.
The conflict has pressured energy supply, and a large part of the recent price rise has been attributed to a risk premium. The source does not state a date for the price moves.
Analysts split on how much risk premium remains
Ryan Mckay, senior commodities strategist at TD Securities, told Bloomberg that diplomatic headlines will weigh more heavily on the market as flows stay elevated. Without a formal armistice, however, he does not expect the risk premium to erode fully on talks alone. Attacks on vessels in the Strait of Hormuz have continued.
Alfonso Jarquín, investment director at VALMEX Casa de Bolsa, described oil as trapped between demand destruction and geopolitical risk. Crude flows from the Gulf have improved on the most critical moments of the crisis, and several producers have recovered much of their exports. High prices, he said, are already affecting global energy consumption.
Supply recovery meets weaker demand
The two forces pull in opposite directions. Supply has partly recovered, but consumers are cutting back at current prices. Whether talks translate into lower prices will depend on whether attacks on shipping stop.
Related: Oil steadies after 7% drop as US and Iran signal talks · Gold falls below $3,900 to lowest since late October
