Oil extends decline amid U.S.-Iran diplomacy hopes

Oil prices experienced a decline of nearly 2% in Asian trading on Monday, building on previous week's losses. This downward trend continued as investors turned their attention towards ongoing diplomatic efforts to resolve the U.S.-Iran conflict, despite persistent Houthi attacks originating from Yemen. The Brent Oil Futures expiring in November fell by 1.8% to $101.99 per barrel, while West Texas Intermediate (WTI) crude futures saw a decrease of 2.1% to $98.24 per barrel.

It is noteworthy that Brent oil had already experienced weekly losses on Friday, as indications of potential diplomatic progress and efforts to restore disrupted Saudi supplies helped alleviate some of the market's supply concerns.

U.S. President Donald Trump indicated during a Fox News interview that he might be open to meeting Iranian President Masoud Pezeshkian during the United Nations General Assembly in New York this week. Should negotiations progress, this could potentially diminish the geopolitical premium in crude oil prices. However, the recent Houthi attacks, which targeted Riyadh, serve as a stark reminder of the risks faced by energy infrastructure and shipping routes in the region.

These attacks prompted Saudi Arabia to issue air-raid alerts for the capital, reflecting the heightened tensions stemming from the broader U.S.-Iran conflict. The ongoing confrontations have heightened concerns over potential disruptions to Saudi oil exports, particularly concerning the East-West pipeline, which carries crude from the kingdom's eastern fields to the Red Sea.

Despite Saudi Arabia's efforts to explore alternative transportation methods, such as ship-to-ship transfers through Oman's Sohar port, the pipeline remains affected by the recent attacks.

The conflicting information surrounding oil market developments leaves energy markets highly sensitive to both diplomatic and military progress.