President Donald Trump's announcement that negotiations with Iran would restart triggered a sharp sell-off in global oil markets. The price of a barrel of Brent crude fell 7.4% to $83.41, driven both by the diplomatic expectations and the OPEC+ group's decision to increase output. Prices, which had risen to $90.80 on Friday, suffered a significant drop in a single day. West Texas Intermediate (WTI) crude fell to $79.60 per barrel.
Trump optimistic on Iran negotiations
President Trump said negotiations with Iran would resume today and that he was optimistic about reaching an agreement. Expressing his expectation that an agreement could soon be reached on opening the Strait of Hormuz and Iran's nuclear disarmament, Trump explained that talks with Saudi Arabia, the United Arab Emirates (UAE), Qatar and Iran had led him to halt a "major attack" he had planned for this weekend.
"This would have been the largest attack since World War II. But they asked us not to do it. They said, please don't do this; their neighbors said the same thing," Trump said, adding that what they are doing now is negotiating with them, that talks would begin tomorrow afternoon and that they would see what happens. Stressing that he very much wanted to "save many people's lives" by reaching an agreement, Trump reiterated his optimism about a deal with Iran.
OPEC+ to increase output in September
Also weighing on oil prices was the OPEC+ group's continuation of its decision to increase output in September. According to a statement from OPEC, during an online meeting of Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman, it was decided to increase total production by 188,000 barrels per day starting in September, in line with their shared commitment to support stability in the oil market. This increase will occur as part of additional voluntary output cuts of 1.65 million barrels per day announced in April 2023.
Under the decision, the largest production increases will be made by Saudi Arabia and Russia, each adding 62,000 barrels per day. Next month, Iraq will increase output by 26,000 barrels per day, Kuwait by 16,000, Kazakhstan by 10,000, Algeria by 6,000 and Oman by 5,000. The group's next meeting will be on September 6.
Market analysts note that technically, $83.75 could be seen as a resistance level for Brent crude while $82.97 could be support.
