Oil continues to fall amid US-Iran negotiation signals

Oil prices are declining for the fourth consecutive trading session as the market reacts to new diplomatic signals regarding a possible end to the US-Iran war and increased volumes of energy carriers passing through the Strait of Hormuz.

On Monday, September 21, the international benchmark Brent fell towards $102 per barrel, while US WTI traded above $98. For Brent, the current losing streak could become the longest since June.

One of the main factors putting pressure on prices was expectations of diplomatic activity during the UN General Assembly in New York. US President Donald Trump told Fox News that he "probably" would be ready to meet with Iranian President Masoud Pezeshkian on the sidelines of the General Assembly.

Washington previously allowed Pezeshkian, Foreign Minister Abbas Araghchi and a limited Iranian delegation to arrive in New York. In parallel, Qatar continues mediation efforts aimed at resuming negotiations between Washington and Tehran.

The oil market was also influenced by signs of improvement in shipping through the Strait of Hormuz, which remains a critical route for oil and liquefied natural gas supplies from the Persian Gulf.

According to the commander of US Central Command, Admiral Brad Cooper, over the past two weeks the volumes of oil and LNG shipped through Hormuz reached the highest level in six months. He stated that the main shipping lanes of the strait have been cleared of mines, and Persian Gulf countries have transported over 1 billion barrels of oil through this route over the past few months.

This reduces traders' fears of a prolonged physical shortage of crude, which previously supported oil prices. However, the market situation remains volatile: the war continues, part of the Middle Eastern energy infrastructure is damaged, and maritime transportation remains significantly more expensive than before the escalation.

That high shipping cost still limits the effect of cheaper crude oil. Freight rates for large oil tankers earlier rose to historic highs due to a shortage of vessels and route changes in the Hormuz area.

Thus, the market has begun to partially remove the "war premium" from oil prices, but further dynamics will depend on whether this week's diplomatic signals turn into real negotiations and whether stable tanker traffic through the Strait of Hormuz persists.

Based on materials from: Bloomberg, Al Jazeera