Oil prices fell on Wednesday afternoon after US President Donald Trump announced that Iran was backing off its retaliatory stance, and was, as the US President put it, "standing down".
Oil prices were trading sharply down following Trump's announcement.
WTI, which had spiked to over $65 on Tuesday, had already started to fall earlier on Wednesday after President Trump sent a reassuring tweet that all was well. But prices fell continued to fall, and started to plummet well below pre-spike levels.
WTI was trading hands at $59.45 per barrel by 1:40pm EST-a 5.18% drop on the day. The price of a Brent barrel had fallen to $65.22 at that time, a 4.47% loss on the day, and down from a high of $71.17 on Tuesday.
Natural gas prices are also down on the day by 1.25%.
President Trump called the Wednesday de-escalation a "very good thing for the world," although oil bulls, who had reaped big rewards following Iran's fruitless missile attack on US bases in Iraq, may disagree.
U.S. oil companies were already rushing to hedge their production at the higher oil prices on Tuesday. According to industry sources that spoke to Bloomberg, many shale producers added more hedges for their production to lock in the higher prices for their output this year and the next.
Most of the major oil stocks were trading down on Wednesday as well, including ConocoPhillips (NYSE: COP), which was down 2.45%, Exxon (NYSE: XOM)at -1.39%, Royal Dutch Shell (NYSE: RDS.A) -1.67%, Chevron (NYSE: CVX) -0.84%, Phillips 66 (NYSE: PSX) -3.62%), and EOG Resources (NYSE: EOG) -1.78%.
Morgan Stanley had advised its clients to trade on the rally before it faded, saying that the recent increase in oil prices could give energy stocks a boost after a lousy decade.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group. More
Comments
The reason prices fell following the Iranian attacks is because the global oil market is well supplied as a result of a glut which has been augmented by two years of trade war to an estimated 4.0-5.0 million barrels a day (mbd).
The glut is big enough to undermine OPEC+ production cuts, nullify the impact of geopolitics and outages on oil prices and even absorb the loss of half of Saudi oil production. It is still capable of absorbing attacks on American military bases.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Why did oil tank on this day, coincidental to this week's events?