Oil prices declined on Monday, with Brent crude and US West Texas Intermediate dropping to their lowest levels since September 10. Brent crude fell by $2.16, or 2.08%, to $101.71 per barrel, after a 0.91% decline on Friday. US West Texas Intermediate decreased by $2.15, or 2.14%, to $98.15 per barrel, following a 1.58% drop in the previous session.
According to Tim Waterer, chief market analyst at KCM Trade, some of the risk premium has started to fade from oil prices due to hopes of a diplomatic path to de-escalate the war between the US and Iran. However, the extent of this hope remains unclear. Waterer noted that the decline in oil prices is also attributed to some investors transferring their positions from October contracts to November contracts.
The decline in oil prices comes as tensions between Iran and the US remain high. On Sunday, Iran and the US exchanged new threats, with US President Donald Trump stating he is open to meeting Iranian President Masoud Pezeshkian, who is expected to attend the United Nations General Assembly meetings in New York this week.
Iranian security official Mohsen Rezaei stated in an interview on Saturday that Iran has informed mediators of its conditions for returning to negotiations to end the war with the US. Despite diplomatic hopes, tensions in the Middle East remain elevated, with Yemen's Houthi group, supported by Iran, claiming to have targeted sensitive sites in Saudi Arabia's capital Riyadh with missiles and drones.
The Houthi group also claimed to have targeted a facility belonging to Saudi Aramco in the Red Sea city of Yanbu. According to three Iranian sources, China has requested Iran's assistance in curbing the Houthis' actions, following a Saudi request for Beijing's intervention after the attacks.
The attacks have impacted Saudi Aramco's operations, with the company increasing its exports through the Strait of Hormuz in September and October, after halting some shipments via Yanbu. This has helped Saudi Arabia's exports recover to over 4 million barrels per day since early September, after dropping to 2.4 million barrels per day in August.
Analysts at JP Morgan noted that Middle Eastern oil flows remain strong despite disruptions to Saudi Aramco's East-West pipeline. They reported that total oil flows averaged 17.1 million barrels per day over the past ten days, only 6.1 million barrels per day less than the 2025 average.
Key points
- Oil prices have dropped to their lowest in over a week amid hopes of a diplomatic resolution to the US-Iran conflict.
- Tensions in the Middle East remain high despite diplomatic efforts, with the Houthi group claiming to have targeted Saudi Arabian sites.
- Saudi Aramco's exports have recovered to over 4 million barrels per day after disruptions to its East-West pipeline.
