Oil prices extended their decline in off-hours trading over the weekend, adding to the bearish sentiment that gripped the market on Friday.
On September 12th, New York crude slipped below $96 per barrel in after-hours trading, marking a drop of more than 1% for the session. Meanwhile, Brent crude futures also fell below the $100 threshold, losing over 1.9% intraday.
Shifting the geopolitical narrative, US President Donald Trump stated on Saturday that the conflict with Iran is likely to conclude shortly after the November midterm elections, expressing expectations that energy prices will fall significantly once that occurs. While fielding questions from reporters during a visit to Ireland, Trump remarked, "I think it will be soon, actually, I believe it will be after the midterms. I don't think it will last much longer, and once the war is over, oil prices will come down quickly."
Despite Friday's retreat, prices still posted substantial gains for the week, having earlier surged past $100 per barrel for the first time in months. The global benchmark Brent crude futures settled down 2.8% on Friday at $104.61 per barrel, while US West Texas Intermediate (WTI) slipped 2.4% to close at $100.05. Just a day earlier, on Thursday, Brent had spiked to roughly $108 a barrel, with WTI breaking above $104.
This latest price drop coincided with reports from Iranian state media indicating that Tehran is set to hold talks with Gulf nations in Oman regarding the Strait of Hormuz. While regional tensions have escalated markedly over the past week, this news signals that diplomatic channels remain active. Iranian and Gulf officials are scheduled to convene in Muscat, Oman's capital, on Monday with the aim of signing an agreement to establish a shipping corridor linking Iran and Oman through the Strait of Hormuz.
Iranian officials have indicated that Tehran still hopes to broker a deal allowing it to levy transit fees on vessels using the Strait of Hormuz, a request that Oman has reportedly opposed. In a parallel development, Iran's ally in Yemen, the Houthi movement, has advanced to the vicinity of the Bab el-Mandeb Strait, another critical artery for Middle Eastern oil transport. Situated on the opposite side of the Arabian Peninsula, this passageway continues to be a vital chokepoint for global energy and shipping commerce.
Meanwhile, the crude futures market is undergoing its own recalibration. Given that the Relative Strength Index (RSI) for oil was in overbought territory for much of last week, the potential for further downward correction persists. Data from Kpler reveals that commodity trading advisors (CTAs), who typically follow trends, had already boosted their Brent positions to a maximum long level of 100% by Thursday. This suggests that their capacity for additional buying has largely been exhausted.
As analysts see it, the core question investors must now grapple with is whether the current supply deficit in the oil market is structural in nature or merely a temporary phenomenon. "The possibility of a further surge in oil prices cannot be ruled out. With global and regional inventories continuing to decline, oil prices revisiting this April's high of $126 per barrel remains a plausible scenario. However, the higher prices climb, the more severe the damage to demand becomes. The key distinction between the current crisis and the first Gulf War in 1990 is that oil demand elasticity is significantly greater now compared to 35 years ago. Renewable energy is fully capable of substituting for a portion of oil demand, particularly in the power generation sector. If a ceasefire materializes, supply could increase; conversely, if the conflict persists, demand might decline due to the widespread adoption of alternative energy sources."