Oil dropped to a one-week low as U.S. President Donald Trump considered easing sanctions on Iran that severely restricted the OPEC member’s ability to export crude.
Futures declined more than 2% in New York and London on Wednesday. Trump is preparing to meet with Iranian President Hassan Rouhani later this month, according to people familiar with the matter. Such talks would be unprecedented for an administration that made isolating the Islamic Republic a cornerstone policy.
Friction within the White House roiled oil markets for a second straight day as foreign-policy clashes boiled over into public view and the president signaled a possible rapprochement with Iran.
“The crude market will be very sensitive to any changes to the U.S.-Iran relationship,” said Brian Kessens, a portfolio manager at Kansas-based Tortoise. “If the relationship improves, there will be more Iranian crude for the market.”
Separately, diesel stockpiles in the world’s biggest economy expanded by 2.7 million barrels last week, surprising analysts who were girding for a withdrawal. Crude oil has been locked within a narrow $5.92 range for the past month as slowing demand growth vied with geopolitical supply threats. Since late April, the futures have fallen 16%.
West Texas Intermediate crude for October delivery settled down $1.65 at $55.75 a barrel on the New York Mercantile Exchange, the lowest close since Sept. 3.
Brent for November settlement decreased $1.57 to $60.81 on the ICE Futures Europe Exchange. The global benchmark traded at a $5.14 premium to West Texas Intermediate for the same month.
Meanwhile, any easing of Iranian sanctions could pressure U.S. producers who have flooded international markets with crude from shale fields.
“More Iranian oil could be back on the market within a month or two,” according to Leo Mariani, an analyst at KeyBanc Capital Markets.
