Oil drops 3% on optimism over Qatar-led talks to end war on Iran - Sarmad

Oil prices fell by more than three percent in early Asian trading on Monday, following a third consecutive day of talks between Iranian and Qatari officials aimed at reaching an agreement to end the US-Israeli war on Iran.

By 0407 GMT, Brent crude futures had dropped $3.68, or 3.2 percent, to $109.75 per barrel, while US West Texas Intermediate crude fell $3.43, or 3.3 percent, to $100.69 per barrel.

Brent October futures closed at their highest level in six months, amid concerns that tensions between the United States and Iran could escalate again following the US midterm elections scheduled for Tuesday.

Tim Waterer, a market analyst at KCM Trade, said, “Oil is experiencing a technical pullback this morning after strong gains last week.”

He added, “Continued hopes for some form of diplomatic progress, along with the absence of any major military escalation at the start of the week, have eased some of the immediate pressure on prices for now.”

However, he noted that the market remains on alert for the possibility of heightened rhetoric regarding Iran, which could push Brent toward $120 per barrel after the midterm elections.

Iranian Foreign Minister Abbas Araghchi said on Sunday that the goal of the “ongoing and advanced” talks is to continue consultations with Qatari mediators, adding that Tehran is prepared to pursue “both defense and diplomacy.”

The talks come amid attacks on oil tankers transiting the Strait of Hormuz, which are driving up global energy and shipping costs. Two of three ship-tracking companies reported that Saudi Arabia increased its crude oil exports in October compared to September, despite Houthi attacks, backed by Iran, on its energy infrastructure.

Analysts at ING wrote in a client note that “recent oil price movements reflect a market increasingly preparing for the possibility of further combat between the United States and Iran.”

They added, “If the midterm elections pass without strikes or a deal, the key question is whether the market will continue to price in a significant geopolitical risk premium or whether this premium will begin to gradually fade.”

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia within the OPEC+ framework, kept production targets for December unchanged on Sunday, reaffirming expectations that no further policy adjustments would be made before next year, as the group continues to face challenges due to disruptions in oil exports caused by the Iran war.