SINGAPORE: Oil prices slipped more than 3% on Monday after Iranian and Qatari officials held a third straight day of talks aimed at pushing for a deal to end the US-Israeli war on Iran.
Brent crude futures fell $3.43, or 3%, to $110 a barrel by 0712 GMT while US West Texas Intermediate crude fetched $100.62 a barrel, down $3.50, or 3.4%.
Brent ended October at its highest in six months amid concerns that the US-Iran conflict could escalate again after Tuesday's US midterm elections.
"Oil is seeing a technical pullback this morning after last week’s strong gains," said Tim Waterer, chief market analyst at KCM Trade.
"Lingering hopes of some form of diplomatic progress, combined with the absence of any meaningful military escalation over the weekend, have taken some of the immediate heat out of prices for now."
Iranian Foreign Minister Abbas Araqchi said on Sunday that the purpose of the "ongoing and progressing" talks was to continue consultations with the Qatari mediators, adding Tehran was prepared for "both defence and diplomacy".
The talks come amid attacks on oil tankers transiting the Strait of Hormuz that are driving up global energy and shipping costs. In October, Saudi Arabia increased crude exports versus September despite attacks by the Iran-aligned Yemeni Houthis on its energy infrastructure, two of three ship-tracking companies said.
However, some analysts expect the market's upside to be capped at $120 a barrel, arguing markets have already priced in the risk of a further escalation in Middle East tensions through year-end.
"Prices have already priced in escalation of US-Israel response in the aftermath of the midterms, so we don’t expect the market to be surprised if attacks on Iran resume over the next two weeks," said DBS Bank's head of energy research Suvro Sarkar.
"As crude largely keeps flowing through the Strait and bypass routes at close to 80% of pre-war levels, we think market reactions will be capped around USD120/bbl on news of significant strikes before normalising again."
The Organization of the Petroleum Exporting Countries and allies including Russia, or OPEC+, kept December production targets steady on Sunday, confirming expectations that more policy adjustments will not occur until next year, as the group continues to struggle with export disruptions from the Iran war. - Reuters
