Oil falls below $100 despite Trump's 'annihilate' threat against Iran

Oil prices fell below $100 a barrel for the first time in about two weeks, even as US President Donald Trump raised the prospect of "annihilating" Iran in a speech at the UN General Assembly. Markets chose to focus on the possibility of a diplomatic resolution and a recovery in Saudi Arabian crude supply rather than the risk of escalating military conflict.

Brent crude for November delivery settled down 1.1 percent at $99.25 a barrel on the London ICE Futures Exchange on Tuesday (local time), the first close below $100 since Sept. 8, when it finished at $97.92.

West Texas Intermediate for October delivery also fell 1.2 percent to $94.59 a barrel on the New York Mercantile Exchange.

Earlier that day, Trump addressed the 81st session of the UN General Assembly at UN headquarters in New York, presenting Iran with two stark choices: negotiations or "annihilation."

"Will we make a deal with Iran and let them rebuild and become a far greater nation than they have ever been before, or will we rapidly annihilate Iran and never give them the chance to kill people and destroy nations again?" he said.

Trump added that he believed a deal would be reached shortly after the US midterm elections in November, saying it "makes no sense" for Iran not to come to the table.

Despite Trump's use of terms such as "annihilate" and "hell" — which prompted the Iranian delegation to walk out of the General Assembly hall — oil prices moved lower. The market appeared to assign greater weight to the prospect of a diplomatic settlement with Iran than to the president's hawkish rhetoric.

A key driver of the decline was signs that the supply disruptions in the Middle East that had recently pushed prices higher were beginning to ease.

Trump said US forces had recently escorted an oil tanker carrying 1 billion barrels worth of crude through the Strait of Hormuz, adding that more oil than ever was transiting the strait under American military protection.

Saudi Arabia's east-west pipeline, which had been shut down following attacks by Yemen's Houthi rebels, was also reported to have resumed operation. The pipeline is a critical artery carrying crude from Saudi Arabia's eastern oil fields to the Red Sea port of Yanbu.

According to Bloomberg, the pipeline has already restarted and is expected to recover a significant portion of its flow capacity by this weekend before resuming exports around Sept. 29.

Crude loadings are also recovering quickly in eastern Saudi Arabia. According to shipping data firm Kpler, the port of Ras Tanura — one of Saudi Arabia's largest crude export hubs — recorded its highest shipment volumes since the outbreak of the war with Iran.

Six very large crude carriers departed loaded with a combined 12 million barrels of oil. As major Middle Eastern supply routes return to normal one by one, concerns about supply disruptions that had weighed on oil prices since the start of the war are beginning to ease.