Oil falls below $90 for the first time since August

The price of oil fell below $90 a barrel on Tuesday, November 10, for the first time since August. Traders reacted to President Donald Trump's comments that the war with Iran could end "fairly soon," even as attacks on ships near the Strait of Hormuz continue.

The numbers

• Brent crude, the world benchmark, traded around $89.70 a barrel in early European trading.
• U.S. crude (WTI) fell below $85, trading near $84.60 later in the day.
• Brent was above $117 a barrel in late October, so it has fallen roughly 25 percent in about two weeks.
• The week before, Brent had already posted its biggest weekly drop since April 2020.

Why prices are falling

The main reason is a change in tone from Washington. On Monday, after meeting Qatar's prime minister, who has been passing messages between the United States and Iran, President Trump said the war would likely end "fairly soon" and that further strikes on Iran did not seem necessary for now. He also said U.S. forces remain ready if talks fail.

Markets also see signs that more oil is getting through. According to market analysts, crude flows through and around the Strait of Hormuz have partly recovered from their lows, and other Gulf producers, including Saudi Arabia, the United Arab Emirates, Iraq and Kuwait, increased their exports in October. Some of that oil travels by pipelines and ports that avoid the strait altogether.

A third factor is the bigger supply picture. Even before the latest talks, the world was producing more oil than it was using. Bank analysts estimated the global market had a surplus of more than one million barrels a day in September and October.

The risks have not gone away

While prices are falling, the waters around the strait remain dangerous:

• November 8: Iran's Revolutionary Guards said three oil tankers caught fire in the strait while using what Iran called an "unauthorized" route. Iran blamed naval mines. The U.S. military's Central Command disputes that, saying the recognized main shipping routes are clear of mines.
• November 9: the UK Maritime Trade Operations center, which tracks shipping security, said a tanker fire off Khasab, Oman, was an attack and that the crew had to evacuate. It did not say who was responsible. Iran's navy said the ship had switched off its tracking system and hit mines in a "forbidden" area, and said the strait will stay closed to vessels until "all threats are lifted."
• The same maritime center has counted about 10 incidents in the area since November 1, including at least two in which a sailor was killed.
• On November 7, Central Command said U.S. forces disabled a commercial vessel in the Gulf of Oman after its crew repeatedly ignored warnings and tried to get past the U.S. naval blockade of Iran.

Is a deal close?

That depends on who you ask. President Trump has sounded optimistic, but Secretary of State Marco Rubio said this week that some of Iran's demands are "not realistic." On the Iranian side, the secretary of Iran's top security council publicly rejected Trump's claims of progress. Tehran says it has a list of conditions, including lifting sanctions and the blockade, that must be met first.

Several energy analysts say the gap between the two sides is still wide. In their view, the market is pricing in hope of a deal more than an actual agreement, which means prices could jump again quickly if talks break down or a major ship is hit.

What it means for you

For drivers, falling oil prices usually reach the pump within one to two weeks. The U.S. national average for regular gasoline was already down to about $4.01 a gallon on November 9, according to AAA, from higher levels earlier this fall. In Canada, pump prices have also started to ease in many cities.

Cheaper oil also helps airlines, trucking and farming, and it eases one of the main sources of inflation. That matters for central banks such as the U.S. Federal Reserve and the Bank of Canada, which have been worried that high energy prices would push up the cost of other goods.

The picture is different for oil-producing regions. In Canada, Alberta and Saskatchewan depend heavily on oil revenue, and in the United States, states like Texas and North Dakota feel the same effect. Lower prices can mean less drilling, fewer energy jobs and smaller government budgets in those places.

What to watch next

• Any written agreement between Washington and Tehran, or a breakdown in talks.
• Whether attacks on tankers near the strait slow down or continue.
• Monthly oil market reports this week: the U.S. Energy Information Administration on Tuesday, OPEC on Wednesday and the International Energy Agency on Friday.
• Gas prices at the pump over the next two weeks.