Oil drops on Middle East optimism

US crude oil has fallen to a six-week low on hopes that relations between the US and Iran might be close to a breakthrough.

US light crude oil futures for November fell to $103.10 per barrel today, after touching as low as $102.30 earlier in the session, the lowest price struck since 8 August.

President Obama was speaking today at the UN General Assembly as a resolution is sought to deal with Syrian chemical weapons, but the tone he struck with regard to Iran spurred speculation that relations between the US and Iran may be thawing. After decades in which the two countries have had no diplomatic dealings to speak of, President Obama today acknowledged Iranian suffering at the hand of Iraqi chemical weapons.

He also stated his desire to seek a peaceful solution in which Iran would adhere to the Nuclear Non-Proliferation Treaty. ‘We are not seeking regime change,’ he said, ‘And we respect the right of the Iranian people to access peaceful nuclear energy.’

A shift in relations between the US and Iran, combined with agreement amongst leaders on how to deal with Syria’s weapons, would erase many of the worries surrounding the Middle East that have been adding an uncertainty premium to the price of crude oil in recent weeks.

US crude oil inventory data will be released by the US Energy Department tomorrow.

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