Oil declines as traders parse signs of fresh diplomacy on Iran

[TOKYO] Oil dropped as traders assessed fresh diplomatic efforts in the Middle East to avert a potential restart of US military strikes on Iran.

West Texas Intermediate fell below US$102 a barrel, after rising by almost 3 per cent in the previous session, while Brent closed near US$115.

Iran’s Foreign Minister Abbas Araghchi said that Teheran continued to give diplomacy a chance, and The Wall Street Journal reported US Vice-President JD Vance had reached out to Mohsen Rezaei, secretary of the nation’s top security body.

US President Donald Trump told Axios on Wednesday (Oct 28) that negotiations were taking place through mediators but stressed he did not know whether they would bear fruit.

“We need to finish the job – either through a deal or another way – we will find out if negotiations can succeed,” he was quoted as saying.

“Headlines like this can move prices,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. “Any indication of communication between senior officials on both sides may be enough to prompt some profit-taking, and take a bit of that risk premium out.”

Global benchmark Brent has rallied by 11 per cent in October, touching the highest since April, as the conflict has dragged on.

The surge has heaped pressure onto consumers and presented a challenge to central bankers seeking to contain inflation.

While the US Federal Reserve opted to keep interest rates unchanged this week, traders expect officials to resume tightening in December.

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US voters go to the polls on Nov 3 for midterm elections amid signs that there will be a slump in support for Republicans. Trump has given frequent signals that he may resume a military campaign against Teheran after ballots have been cast, possibly in coordination with Israel’s forces.

In Israel, Prime Minister Benjamin Netanyahu edged ahead of opposition leader Gadi Eisenkot after a tightly fought election, although neither has a clear path towards forming a government.

It will be days before President Isaac Herzog chooses who gets the chance to cobble together a new ruling coalition.

There are mixed signals from physical markets. Saudi Arabia’s exports are holding near wartime highs despite attacks on energy infrastructure and tankers transiting the Strait of Hormuz, according to ship-tracking data.

Meanwhile in the US, nationwide crude inventories fell by 1.9 million barrels last week to the lowest level since July, with exports running at the strongest pace since May, according to the Energy Information Administration.

Among products, stockpiles of petrol in the Midwest fell to the lowest level on record.

On the corporate front, traders are in line for a deluge of earnings and commentary from the supermajors on Thursday and Friday, including results from Shell, TotalEnergies, ExxonMobil and Chevron. BLOOMBERG