Crude extends sell-off as Tehran links reopening of key shipping route to easing of US military pressure and blockade…
Oil prices fell to their lowest level in about two weeks on Tuesday as the prospect of a diplomatic opening between Iran and the United States eased some of the supply fears that had pushed crude sharply higher in recent weeks.
The latest sell-off followed an indication from Tehran that it could reopen the Strait of Hormuz within seven days if Washington eases military pressure and lifts its blockade on Iranian ports.
Brent crude fell by about 2.1 per cent to $98.23 a barrel, while the front-month West Texas Intermediate contract dropped 2.59 per cent to around $93.30. The more actively traded November WTI contract was also lower, trading around $90.01 at the time of the report.
The move marks a sharp reversal for the oil market, which had been trading above $100 a barrel amid concerns that the conflict in the region could disrupt supplies and restrict tanker movements through one of the world’s most important energy corridors.
The Strait of Hormuz has historically carried roughly one-fifth of global oil and liquefied natural gas supplies, making any sustained disruption to traffic through the waterway a major concern for refiners and energy-consuming economies.
Tehran links Hormuz reopening to diplomacy
A senior Iranian official told Reuters that Tehran was prepared to reopen the waterway if Washington took concrete steps towards de-escalation.
“The US needs to announce that it wants to resolve the issue diplomatically, make that official, and then agree on a timeline for how the process will move forward,” the official said.
The comments came as Iran’s delegation arrived in New York for the United Nations General Assembly, with Tehran indicating that its representatives had authority to revive diplomatic contacts with Washington.
Iran has also said that a proposal for ending hostilities was transmitted to the United States through mediators on September 16.
The possibility of renewed negotiations has consequently become a major focus for oil traders, who are assessing whether a diplomatic breakthrough could restore more normal flows of crude through the Gulf.
The latest Iranian position followed a warning from Tehran’s military command that a resumption of US military operations, particularly with support from regional countries, would trigger retaliation.
Oil gives back recent gains
Tuesday’s decline extended a sell-off that began as diplomatic expectations grew and concerns over the immediate threat to global crude supplies eased.
Brent had settled at $104.82 a barrel on September 17, according to Reuters, meaning the benchmark has since surrendered more than $6 a barrel.
The market has also been watching developments in Saudi Arabia, where the East-West oil pipeline has resumed operations after being disrupted by attacks. Saudi Arabia is also considering the resumption of crude exports from Yanbu, providing another potential route for supplies that would otherwise have faced greater exposure to the Strait of Hormuz.
Those developments have combined with the possibility of renewed US-Iran diplomacy to reduce some of the geopolitical premium embedded in crude prices.
But supply concerns have not disappeared.
Shipping data cited by Reuters showed that traffic through the Strait of Hormuz remained significantly below its recent average last week, highlighting the continuing uncertainty surrounding the waterway.
What lower crude prices could mean for Nigeria
For Nigeria, a sustained decline in international oil prices could have implications for both the downstream petroleum market and the wider economy.
However, a fall in Brent does not automatically translate into an immediate reduction in petrol prices at Nigerian filling stations.
Pump prices are influenced by several factors, including the cost of refined products, exchange-rate movements, refinery pricing, transportation, storage and distribution expenses.
That means the latest fall in crude prices would need to persist before its full effect could potentially filter through to the domestic fuel market.
A prolonged decline could nevertheless reduce some feedstock and refined-product costs and create room for refiners and marketers to reassess prices.
For consumers and businesses already facing elevated transportation and energy expenses, that could become significant if lower international oil prices are sustained.
Markets await the next move
For now, traders remain focused on whether Tehran’s offer translates into actual negotiations and, ultimately, a restoration of normal traffic through the Strait of Hormuz.
The waterway’s reopening would potentially remove a major source of supply uncertainty from the global oil market.
But until there is evidence of a durable diplomatic agreement and a sustained improvement in physical flows, the market remains vulnerable to renewed geopolitical shocks.
The sharp fall in crude prices on Tuesday therefore reflects not only what has happened to oil supply, but what traders now believe could happen next.
