Oil drops 7% as Iran signals openness to peace talks

By Nicole Jao

NEW YORK, Nov 2 (Reuters) - Oil ‌prices fell more ​than 7% ​on Monday as talks between Iranian and Qatari officials lifted hopes for an end to the US-Israeli war with Iran and stabilization of Middle East crude supply.

Brent crude futures settled $8.66, or 7.63%, lower ‌to $104.77 a barrel. US West Texas Intermediate crude was down $7.66, or 7.36%, at $96.46.

The session low for ⁠Brent was $103.28 and for WTI it was $95.15, with some analysts citing hopes for a diplomatic breakthrough after Iranian President Masoud Pezeshkian said Supreme Leader ‌Ayatollah Mojtaba Khamenei had granted the government certain ‌authorities for peace talks.

Pezeshkian added Tehran "will try to resolve the problem with dialogue", without elaborating, according to state media.

The country's negotiators held days of talks with Qatari mediators aimed at ending the war.

Brent ended October at its highest ​in six months on concerns that the Middle East conflict could escalate again after Tuesday's US midterm elections.

US President Donald Trump on Monday said that Iran wants to make a deal to end the war and that such ⁠an agreement "could happen."

On Monday evening, Qatari mediators traveled to Tehran for talks with Iranian Foreign Minister Abbas Araqchi on a potential US-Iran deal.

Signs of progress in ​US-Iran talks pushed oil prices lower, Raymond James analyst Pavel Molchanov said, noting, however, that skepticism is warranted after many "false dawns” over the past several months.

Brent ended October at its ​highest in six months on concerns that the Middle East conflict ‌could escalate again after Tuesday's US midterm elections.

"The oil market is still reacting with extreme sensitivity to every headline out of the Middle East," UBS analyst Giovanni Staunovo said. "While fears of ⁠an imminent escalation pushed prices up last week, they have dropped sharply at the start of this week as diplomatic talks between the US and Iran continue," he added.

The talks followed a recent increase in attacks on oil tankers passing the Strait of Hormuz, though ⁠there have also been signs of shipments rising from some major exporters.

Saudi Arabia's crude exports increased in October from September, two of ​three ship-tracking companies said, despite attacks by Iran-aligned Yemeni Houthis on its energy infrastructure.

The outbreak of the Iran war at the end of February has depleted oil stocks. The world has drained nearly 1 billion barrels from inventories since the war disrupted shipping through the ‌Strait of Hormuz, said Sultan Al Jaber, chief executive of ADNOC, Abu Dhabi's state-owned oil company.

Oil could rise further, some analysts said. Goldman Sachs on Sunday, citing elevated supply, and said ‌Brent could jump to $140 in 2027 if Gulf oil output remains 3.5 million barrels per day below its 2025 average.

"Intensified shipping attacks, ⁠damage to oil infrastructure, and a more ‌persistent risk premium remain the key triggers ​of potential upside," the bank said in a report.

(Reporting by Nicole Jao and Alex LawlerAdditional reporting by Ahmad Ghaddar, Florence Tan and Trixie YapEditing by Louise Heavens, David Goodman, Xevi Fontdegloria and ‌David Gregorio)

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