Oil prices extended their steepest weekly decline since April 2020 on Monday, with Brent crude falling towards $97 per barrel after losing more than 16% last week, as hopes of a diplomatic resolution to the US-Iran conflict eased concerns over potential supply disruptions.
West Texas Intermediate (WTI) crude traded around $91 per barrel.
According to Bloomberg, the latest decline extends a retreat from a six-month high recorded at the end of October, as expectations of reduced tensions following a Democratic sweep of the US midterm elections raised hopes that the conflict would not escalate further.
However, mixed signals from Washington over the prospects of a peace deal have continued to create uncertainty in the oil market.
US Secretary of State Marco Rubio played down expectations of a breakthrough in negotiations with Iran, describing Tehran’s demands as unacceptable and, in some cases, “outrageous and ridiculous.”
His comments contrasted with US President Donald Trump’s more conciliatory tone after CNN reported that he considered further military strikes on Iran “highly unlikely” if negotiations made substantial progress.
The conflicting signals have left traders assessing whether diplomatic efforts can deliver a lasting resolution to a conflict that has disrupted energy exports from the Persian Gulf.
Despite declining oil prices, security risks around the Middle East’s critical energy infrastructure and shipping routes remain elevated.
The UK Maritime Trade Operations reported that a tanker was hit by an unknown projectile over the weekend while travelling outbound through the Strait of Hormuz, one of the world’s most important oil shipping corridors.
In another incident, Yemen’s Iran-backed Houthi rebels damaged offices of Saudi Aramco, the Saudi state-owned oil giant, in Riyadh. Saudi forces subsequently retaliated by destroying two missile launchers.
The attacks have reinforced concerns that renewed hostilities could disrupt crude shipments and reverse the recent decline in oil prices.
Jorge Leon, head of geopolitical analysis at Rystad Energy AS, said the Democratic victory in the US midterm elections does not necessarily increase the likelihood of a diplomatic breakthrough.
He warned that renewed escalation could quickly reverse much of last week’s decline in oil prices.
Meanwhile, crude exports from the Persian Gulf have recovered to near pre-war levels despite continued attacks on vessels transiting the Strait of Hormuz.
According to Dhar, Brent crude could fall to between $70 and $85 per barrel if a deal results in the lifting of the blockade.
He noted that the global benchmark continues to carry a risk premium reflecting the possibility of renewed military confrontation between Washington and Tehran.
Elsewhere, Ukraine struck a sixth Russian oil refinery within a week, intensifying its campaign against energy infrastructure that helps finance Moscow’s war.
Market participants will also monitor upcoming monthly oil market reports from three major forecasting agencies.
The US Energy Information Administration is scheduled to release its report on Tuesday, followed by OPEC on Wednesday and the International Energy Agency on Friday.
Last Monday, Nairametrics reported that oil prices fell more than 4% as hopes of a diplomatic agreement to end the US-Israeli war on Iran eased concerns about further disruptions to global crude supplies.
Nairametrics checks showed Brent crude fell 4.5% to $118.3 per barrel at the time of reporting, while US West Texas Intermediate (WTI) crude fell 4.37% to $99.57 per barrel.
The decline followed a third consecutive day of talks involving Iranian and Qatari officials aimed at advancing negotiations to end the conflict, which has heightened concerns about global oil supplies and shipping through the Middle East.
