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Oil prices fell sharply on Monday after US President Donald Trump said Iran was negotiating “seriously” with the US over its nuclear programme.
Brent crude, the international benchmark, fell as much as 7.4 per cent in early trading before paring some losses.
The prospect of a diplomatic solution to rising tensions between the US and Iran reversed last week’s steep price rises, when combative rhetoric on both sides and Trump’s decision to send an “armada” to the Middle East stoked fears of an imminent conflict.
Oil markets interpreted the absence of an attack by the US over the weekend followed by Trump’s statement on talks with Iran as “a de-escalation”, said Arne Rasmussen, chief analyst at Global Risk Management.
“Oil attracted a lot of speculative flows last week. The change in the geopolitical outlook forced them to sell off,” he said.
Meanwhile, the Opec+ group of oil producers said on Sunday it would stick with its previously announced plan to keep production steady in March.
European gas prices fell as much as 14 per cent on Monday, reducing their gains of the previous two weeks, as fears of shortages eased. The region’s benchmark natural gas price recorded its biggest monthly rise in more than two years in January on the back of supply worries driven partly by colder than expected weather in the US.
A warmer weather outlook for February means more US natural gas could be shipped in liquid form, easing supply concerns in Europe.
Energy prices are falling amid a broad sell-off in other commodity markets. Gold and silver tumbled on Monday, reversing record-breaking rallies last week.