Oil edged lower, though still notched its biggest monthly gain since 2022, as US President Donald Trump reiterated openness to negotiations with Iran, though investors remain on edge about the potential for further tensions.
West Texas Intermediate fell 0.3% to settle near $65 a barrel, snapping a breathless three-day rally, while Brent ended the day above $70. Prices tumbled after Trump told reporters that Iran wants to make a deal. The US president’s messaging has shifted from punishing Tehran for its deadly crackdown on protesters to this week trying to extract a new nuclear agreement.
That siphoned some risk premium out of a market on edge after Trump ordered naval assets to the region, with an aircraft-carrier strike group recently arriving in the Middle East. The Islamic Republic is the fifth-biggest producer in the OPEC+ alliance, when including Russia.
The de-escalatory remarks from Trump aren’t necessarily new, but heading into the weekend, the market is trying to gauge where Trump’s head is at, said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. “Any signal that he may lean toward diplomacy rather than military action creates immediate selling pressure,” she added.
Crude had earlier fallen alongside other markets as Trump’s nomination of Kevin Warsh as the next Federal Reserve chair led to a debate about how far he would cut interest rates. The US president later said that Warsh “certainly wants to cut rates.”
Several bullish factors are still at play, limiting the slide. In the US, coastal cities are bracing for a record-setting cold spell to intensify in coming days, in a potential disruption to production and boost to heating demand. The storm would come just a week after Winter Storm Fern shut in nearly 2 million barrels a day of US oil production at its peak, according to Energy Aspects.
Market concerns are primarily focused on how any fallout from an escalation in tensions could impact Iranian oil flows as well as shipping through the Strait of Hormuz, a narrow passage separating Iran and the Arabian Peninsula. Tankers carrying crude and liquefied natural gas transit through the strait daily to deliver cargoes worldwide.
The turmoil helped drive WTI to a 16.2% monthly gain, its largest in nearly four years. Traders are flocking to the options market, and Citigroup Inc. predicts the risk premium for Brent is around $7 to $10 a barrel.
The Associated Press reported that Iran issued a warning to ships at sea on Thursday that it planned to run a drill on Sunday and Monday that would include live firing in the strait, citing two Pakistani security officials.
Members of OPEC+ will gather online on Sunday to review supply policy for March, with expectations for the group to stick with a pause, and investors will be watching for any commentary regarding Iran.
Oil Prices
WTI for March delivery fell 21 cents to settle at $65.21 a barrel in New York.
Brent for March settlement, which expires Friday, edged down 2 cents to settle at $70.69 a barrel.
The more-active April Brent contract settled at $69.32.
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