Oil prices tumbled about 6 per cent on Monday after Iran’s president said the country’s supreme leader had given the government “certain authorities” to pursue peace talks, raising hopes that disruptions to Middle East supply could ease.
Brent crude futures fell $6.78, or 6.0 per cent, to $106.65 a barrel by 1357 GMT. US West Texas Intermediate crude lost $6.37, or 6.1 per cent, to trade at $97.75.
The contracts dipped as low as $105.86 and $97.12 respectively, after President Masoud Pezeshkian made the remarks, which analysts said boosted expectations of a diplomatic breakthrough.
Mr. Pezeshkian said Supreme Leader Ayatollah Mojtaba Khamenei had granted the government the authorities in question. According to state media, he added that Tehran “will try to resolve the problem with dialogue,” but gave no further details.
The comments followed days of talks between Iranian negotiators and Qatari mediators aimed at ending the war between Iran and the United States and Israel. An official briefed on the discussions said a draft proposal is being circulated and that a follow-up meeting is possible.
Iranian Foreign Minister Abbas Araqchi said on Sunday that the purpose of the talks was to continue consultations with the Qatari mediators, adding that Tehran was prepared for “both defence and diplomacy.”
UBS analyst Giovanni Staunovo said the market remains extremely sensitive to every headline from the region. He noted that fears of an imminent escalation pushed prices up last week, but they dropped sharply at the start of this week as diplomatic talks between the US and Iran continue.
Brent ended October at its highest in six months on concerns that the conflict could flare up again after Tuesday’s US midterm elections.
The talks also came after a recent rise in attacks on oil tankers passing the Strait of Hormuz, although there are signs that shipments from some major exporters are increasing.
Two of three ship-tracking companies said Saudi Arabia’s crude exports rose in October compared with September, despite attacks by Iran-aligned Yemeni Houthis on its energy infrastructure.
The war, which began at the end of February, has depleted oil stocks. Sultan Al Jaber, chief executive of Abu Dhabi’s state-owned oil company ADNOC, said the world has drained nearly 1 billion barrels from inventories since the conflict disrupted shipping through the Strait of Hormuz.
Some analysts see room for prices to climb again. Goldman Sachs raised its price forecasts on Sunday because of elevated supply risks and said Brent could jump to $140 in 2027 if Gulf oil output stays 3.5 million barrels per day below its 2025 average.
The bank said intensified shipping attacks, damage to oil infrastructure and a more persistent risk premium remain the key triggers of potential upside. (Reuters)
