Oil prices fell sharply on Monday as traders assessed the possibility of renewed negotiations between the United States and Iran. Brent crude, the international benchmark, declined as much as 7.96% to $104.40 a barrel at about 1:45 p.m. Brasília time, its lowest level since October 21. At around 3 p.m., it was trading at $104.38, down 8%. US benchmark WTI fell 7.77% to $96.04 a barrel.
The sell-off followed comments by Iranian President Masoud Pezeshkian, who said the country’s supreme leader had granted the government “certain powers” in efforts to secure an agreement with Washington. Pezeshkian said Iran was trying to resolve the issue through dialogue, according to local media.
The comments came as regional mediators, led by Qatar, stepped up efforts to broker an interim deal before the US midterm elections on Tuesday. Iranian officials held talks with mediators in Doha over the weekend, following a day of discussions in Tehran on Friday. A person briefed on the talks said both sides wanted an agreement and appeared more flexible, although it remained uncertain whether diplomacy could overcome their differences.
Oil traders were also watching the possibility of further US and Israeli attacks on Tehran after the elections. Israeli Prime Minister Benjamin Netanyahu is pressing US President Donald Trump to resume the war quickly, according to people familiar with the matter. Trump has ruled out an attack before the midterms but has not decided whether to restart military operations, those people said.
The prospect of dialogue added to volatility in a market already focused on the Middle East conflict. ING strategist Francesco Pesole said oil prices included a substantial geopolitical risk premium and that more moderate rhetoric from both sides had helped bring prices down.
The move also came after Brent for December delivery reached $118 a barrel on Friday. Some of Monday’s decline reflected the shift in the main benchmark contract to January delivery. Analysts remained wary about the chances of a fresh round of peace talks after repeated attempts to reach an agreement over the past eight months.
Executives said months of disruption to Middle Eastern oil flows had reduced the global market’s safety margins and made prices more sensitive to regional developments. Vitol chief executive Russell Hardy told attendees at the Adipec conference in Abu Dhabi that the market was balancing supply and demand in a difficult position, and questioned whether it could withstand further interruptions.
The fall in oil prices helped support a recovery in US stocks on Monday. The Nasdaq 100 rose 0.4%, while the S&P 500 gained 0.6%. Lower oil prices also lifted government bonds that had been pressured by inflation concerns; the yield on 10-year UK gilts fell 0.09 percentage points to just below 5.2%.
Sources: Folha Mercado.