Key Moments
- Brent crude futures dropped $3.30, or 4.8%, to $66.02 per barrel, while U.S. West Texas Intermediate fell $3.23, or nearly 5%, to $61.98.
- Prices pulled back from multi-month highs after U.S. President Donald Trump signaled Iran was “seriously talking” with Washington, reducing perceived geopolitical risk.
- OPEC+ decided to keep March output unchanged, following an earlier decision in November to halt planned increases for January through March 2026.
Market Reaction to De-escalation Signals
Feb 2 (Reuters) – Crude benchmarks slumped nearly 5% on Monday, putting the market on track for its sharpest one-day loss in more than 6 months, as traders reacted to signs of easing tensions between the United States and Iran, a member of OPEC.
Brent crude futures were lower by $3.30, or 4.8%, at $66.02 per barrel at 0528 GMT. U.S. West Texas Intermediate (WTI) crude futures declined $3.23, or nearly 5%, to $61.98 per barrel.
Both contracts retreated steeply from recent multi-month peaks as participants reassessed the likelihood of a military confrontation following comments from U.S. President Donald Trump over the weekend suggesting a possible diplomatic opening with Tehran.
Political Developments and Currency Impact
Trump had repeatedly warned of potential intervention against Iran if it failed to agree to a nuclear accord or continued actions against protesters. According to Priyanka Sachdeva, an analyst at Phillip Nova, those ongoing threats had lent support to crude prices throughout January.
“The recent pullback has also been reinforced by renewed strength in the U.S. dollar, which typically makes dollar-denominated oil more expensive for non-U.S. buyers, further weighing on prices,” Sachdeva said.
On Saturday, Trump told reporters that Iran was “seriously talking,” a remark that came shortly after Ali Larijani, Tehran’s top security official, said that preparations for negotiations were in progress.
Geopolitical Risk Premium Unwinds
Tony Sycamore, market analyst at IG, pointed to these developments, along with reports that the naval forces of Iran’s Revolutionary Guards have no plans to conduct live-fire drills in the Strait of Hormuz, as indications of a reduction in tensions.
“The crude oil market is interpreting this as an encouraging step back from confrontation, easing the geopolitical risk premium built into the price during last week’s rally and prompting a bout of profit-taking,” he said.
OPEC+ Policy and Fundamental Backdrop
At a meeting on Sunday, the OPEC+ alliance decided to leave oil production levels unchanged for March. The group had previously resolved in November to freeze additional planned output increases for the period from January through March 2026, citing seasonally weaker demand.
“Geopolitical risks mask a fundamentally bearish oil market,” Capital Economics said in a note on January 30.
“The historical example of last year’s 12-day war (between Israel and Iran), and a well-supplied oil market, will still bear down on Brent crude prices by end-2026.”
Key Price and Policy Metrics
| Metric | Detail |
|---|---|
| Brent crude futures price | $66.02 per barrel at 0528 GMT |
| Brent daily move | Down $3.30, or 4.8% |
| WTI crude futures price | $61.98 per barrel |
| WTI daily move | Down $3.23, or nearly 5% |
| OPEC+ March output decision | Keep production unchanged |
| Earlier OPEC+ decision | Freeze planned increases for January through March 2026 |
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