Oil prices declined to their lowest levels in over a week on Monday, driven by optimism that upcoming United Nations meetings may pave the way for a diplomatic solution to the conflict between the US and Iran. Additionally, investors are awaiting a partial recovery in Saudi Arabian oil exports despite ongoing Houthi attacks in Yemen. Brent crude and West Texas Intermediate (WTI) fell to their lowest since September 10 early on Monday.
Brent crude futures dropped $2.16, or 2.08%, to $101.71 per barrel, while WTI declined $2.15, or 2.14%, to $98.15 per barrel. According to Tim Waterer, senior market analyst at KCM Trade, some of the risk premium in oil prices began to dissipate due to hopes of a diplomatic path to de-escalate the US-Iran conflict. However, the extent of this impact remains uncertain.
The West Texas Intermediate fell below the psychologically significant $100 per barrel mark. A Singapore-based broker noted that some investors may have shifted their positions from October to November contracts, a day before the first contracts expire. Meanwhile, Iran and the US exchanged new threats on Sunday, with US President Donald Trump expressing openness to a meeting with Iranian President Masoud Pezeshkian.
Pezeshkian is expected to attend United Nations General Assembly meetings in New York this week. A senior Iranian security official, Mohsen Rezaei, stated in an interview that Iran informed mediators of its conditions for returning to negotiations to end the war with the US. Despite these diplomatic hopes, tensions in the Middle East remain high.
The Houthi group, supported by Iran, claimed to have targeted sensitive sites in the Saudi capital Riyadh with missiles and drones on Saturday, along with an Aramco facility in the Red Sea city of Yanbu. According to three Iranian sources, China requested Iran's assistance in curbing Houthi activities following a Saudi request.
The Houthi attacks on Saudi Aramco's East-West pipeline led the state-owned energy company to increase exports through the Strait of Hormuz in September and October. This 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 robust 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 yearly average.
Key points
- Oil prices dropped due to hopes of a diplomatic resolution to the US-Iran conflict.
- Despite these hopes, tensions in the Middle East remain high due to ongoing Houthi attacks.
- Saudi Arabian oil exports have partially recovered following a drop in August.
