(March 23): Oil futures swung sharply on Monday after US President Donald Trump said he held discussions about ending the conflict with Iran, though Tehran denied any such dialogue.
Brent crude fell as much as 14% shortly after Trump made the announcement on his Truth Social network, sliding to US$96 ($122.44) a barrel. Prices then pared a significant portion of the drop after Iran denied there were any talks. Europe’s natural gas benchmark also plunged before paring most of its losses.
Energy markets have been pitched into turmoil since the conflict began at the end of February, with the vital Strait of Hormuz waterway all but blocked. The de facto closure of the waterway has disrupted about a fifth of the world’s oil flows and a similar portion of its liquefied natural gas supply.
The International Energy Agency has described the current crisis as the largest oil supply disruption in history.
US officials have been quick to try and talk down energy prices in recent weeks and Trump’s post on Monday was the latest in a run of comments that appear designed to tame prices. As well as verbal interventions, the US has also announced a release of emergency oil reserves and waived some sanctions on Iranian and Russian crude in a bid to offset some of the barrels lost to the blockage of Hormuz.
Monday’s swings are also the latest in a series of huge prices moves that exhausted oil traders are having to contend with. Four of the six largest swings ever in Brent futures have come since the war began at the end of February.
See also: Oil eases from 2022 high as Trump mulls ‘winding down’ in Iran
“The market is in utter chaos,” analysts at brokerage PVM Oil Associates Ltd wrote in a note. “It is a clear sign of conceding to market forces, rallying oil prices and falling equities,” they said, referring to Trump’s social media post.
Trump said on his Truth Social network that the US had held productive conversations regarding a total resolution of hostilities in the Middle East. He added that discussions would continue throughout the week, but didn’t specify the nature of the talks or who was involved.
See also: US crude is lagging behind as global oil prices skyrocket
The state-run Mizan news agency cited an Iranian Foreign Ministry statement as saying there are no talks between Tehran and Washington. Other media services in the country also said there were no talks.
Last Friday, Trump said that he was considering “winding down” US military efforts, before giving Iran 48 hours to reopen Hormuz and threatening attacks on the country’s power plants.
“Trump is plainly trying to talk down the price,” said Bjarne Schieldrop, the chief commodities analyst of SEB AB. “Reopening Hormuz is up to Iran and not down to Trump’s policies.”
De-escalation could lead to a return of some of those supplies, though much would depend on how soon shipowners will be willing to resume sailing through Hormuz. The flow of most goods through the waterway has been all but halted with shipowners unwilling to risk the lives of their seafarers in the region.
Any halt to hostilities would likely bring relief to the inflationary impact of the conflict, though energy supplies could take some time to restart.
Wall Street banks have been steadily upgrading their oil price forecasts in recent weeks. Goldman Sachs Group Inc said before Trump’s post on Monday that it now expects crude to average US$85 a barrel this year, up from US$77 previously.
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Uploaded by Tham Yek Lee
