Oil falls as Trump downplays prospect of escalation with Iran

By Enes Tunagur

LONDON, Nov 10 (Reuters) - Oil prices extended losses from the previous session on Tuesday after US President Donald Trump downplayed the need for additional military action against Iran, easing fears of sustained Middle East supply disruptions, with prospects of oversupply also in focus.

Brent crude futures were down $2.17, or 2.34% at $90.40 a barrel by 1214 GMT. US West Texas Intermediate (WTI) futures fell $1.75, or 2%, to $85.10. 

The Brent benchmark dropped below $90 on Tuesday for the first time since August 31, having settled down 5.9% in the previous session.

Trump said on Monday that he plans to hold off from new military strikes against Iran after appeals from countries in the region, including from Qatar's prime minister.

"The market continues to prioritise President Trump's more conciliatory tone toward Iran since the midterms," said Tim Waterer, chief market analyst at KCM Trade.

"While attacks on shipping around the Strait of Hormuz are still occurring, they have not escalated in a way that has forced a fresh risk premium into the market." 

In the physical crude oil market, the dated Brent benchmark, against which roughly two thirds of oil supply is priced, has weakened in recent weeks.

The global oil market is showing signs of a return to excess supply as demand drops because of high prices, some analysts said. The global surplus is estimated at around 1.4 million barrels per day in October, JPMorgan said in a report last week.

OPEC oil output rose in October, a Reuters survey found, led by gains in Saudi Arabia, Kuwait and Iraq despite continued constraints on exports.   

Brent has retreated about 23% from the six-month high of $118 it touched on October 30 as fears that Trump might step up attacks on Iran after the US midterms have eased, though concerns remain over potential shipping disruption.

Elsewhere, Russian and Ukrainian officials planned to meet on Tuesday for US-brokered talks — their first since February — after Trump suggested last week that a broad peace deal was possible after four and a half years of conflict.

Renewed Ukrainian drone attacks on Russian oil refineries since late October have reduced Russia's oil refining capacity by about 30%, two industry sources said.

On the demand side, China’s October crude oil imports rose to their highest since March, official data showed on Tuesday, after the country sharply cut imports as the US-Israeli war on Iran disrupted supplies from the Middle East.

(Reporting by Enes Tunagur in LondonAdditional Reporting by Sethuraman N R in New Delhi and Noel John in BengaluruEditing by David Goodman)