SINGAPORE: Oil prices fell more than 1% on Monday as fears of a Middle East conflict eased after the U.S. and Iran pledged to continue indirect talks about Tehran's nuclear programme, calming worries about potential supply disruptions.
Brent crude futures fell 84 cents, or 1.2%, to $67.21 a barrel by 0747 GMT on Monday, while U.S. West Texas Intermediate crude dropped 82 cents, or 1.3%, to $62.73.
"With more talks on the horizon, the immediate fear of supply disruptions in the Middle East has eased quite a bit," IG market analyst Tony Sycamore said.
Iran and the U.S. pledged to continue the talks following what both sides described as positive discussions on Friday in Oman. That eased the concern that a failure to reach a deal might nudge the Middle East closer to war, as the U.S. has positioned more military forces in the area.
About a fifth of the world's oil consumption passes through the Strait of Hormuz between Oman and Iran.
Both oil benchmarks fell more than 2% last week as tensions eased, their first decline in seven weeks.
However, the foreign minister of Iran said the country will strike U.S. bases in the Middle East if it is attacked by U.S. forces, showing the simmering threat of conflict.
"Volatility remains elevated as conflicting rhetoric persists. Any negative headlines could quickly reignite risk premiums in oil prices this week," said Priyanka Sachdeva, senior market analyst at Phillip Nova.
Investors are also grappling with Western efforts to curb Russia's income from oil exports that support its war in Ukraine. The European Commission on Friday proposed a sweeping ban on any services that support Russia's seaborne crude oil exports.
Refiners in India, once the biggest buyer of Russia's seaborne crude, are avoiding purchases for delivery in April and are expected to stay away from such trades for longer, refining and trade sources said, which could help New Delhi seal a trade pact with Washington.
"Oil markets will remain sensitive to how broadly this pivot away from Russian crude unfolds, whether India’s reduced purchases persist beyond April, and how quickly alternative flows can be brought online," Sachdeva said. - Reuters
