Crude Prices Tumble as Iran Fears Ease and a Russia-U.S. Collaboration is Proposed

Vladimir Putin says his country shares American concerns about crude price maintenance. File Image / Pixabay

U.S. president Donald Trump may currently be weathering another round of criticism for his supposedly weak showing against Russian president Vladimir Putin, but there's no denying that one of his objectives on the international front - to see crude prices drop in order to benefit Americans at the pump - is rapidly coming true, as U.S. crude on Monday plummeted a massive 4.2 percent.

Said to be in reaction to U.S. treasury secretary Steve Mnuchin declaring that some crude importers may receive waivers to continue buying supplies from Iran despite sanctions against the Islamic republic, West Texas Intermediate dropped $2.95 to $68.06, compared to its 3.5 year high above $75 per barrel; Brent fell $3.49 to $71.84 per barrel.

To further Trump's goal of obtaining less expensive oil, his administration is also considering releasing oil from the nation's Strategic Petroleum Reserve, according to several news agencies.

Seemingly all but a distant memory on Monday for analysts was their worry - which had been fomenting for weeks and supporting high crude prices - of a global market tightening caused by the Iran sanctions as well as dropping supply from Venezuela and unplanned outages in Libya and Canada - despite Saudi Arabia and Russia repeatedly stating that they could make up the shortfall.

With Libya back on line and Canada soon to follow, it seems now that it's questionable whether both countries will need to spring into action: also on Monday came word that China's second-quarter GDP growth expanded at a slower pace than expected, and June factory output growth weakened to a two-year low.

As for the near future, an unlikely alliance between Trump and Putin could result in crude prices being maintained so as to avoid perilous highs and equally undesirable lows: Putin suggested the possibility on Monday, stating that, "I think that we as a major oil and gas power, and the United States as a major oil and gas power as well, we could work together on regulation of international markets, because neither of us is actually interested in the plummeting of the prices.

"But nor are we interested in driving prices up because it will drain a lot of juices from all other sectors of the economy, so we do have space for cooperation here."

As Trump continues to be vilified by the mainstream media, at least one respected analyst is giving him his due: Helima Croft, global head of commodity strategy for RBC Capital Markets, told CNBC that "President Trump has actually gotten quite a lot out of the Russians....it was the Russians that took the lead in pushing for OPEC [the Organization of the Petroleum Exporting Countries] loosening the taps.

"On the energy side I think Trump can say the Russians have been helpful, (and) in the last couple of days the Russians have signaled they're going to put more barrels on the market as needed, and president Trump needs every barrel he can get as he's poised to take Iran exports off the market."

Of course, once the Iran sanctions come into full effect, it doesn't necessarily mean everyone will be deprived of oil from that country - at least, if Iranian promises are to be taken seriously: last week a statement from Tehran's embassy in New Delhi read, "Iran understands the difficulties of India in dealing with (an) unstable energy market and it has done and will do its best to ensure security of supply to India."