Oil settles lower on peace hopes

Brent crude futures edged lower on Monday as hopes for reduced hostilities in the Middle East took hold, but persistent threats against Saudi Arabia and maritime attacks kept investors on edge and prices hovering close to six-month peaks. Brent dropped 91 cents, or 0.8 percent, to $115.81 a barrel, while US West Texas Intermediate crude slipped 1.51 cents, or 1.46 percent, to $101.76 a barrel.

Both indexes had rallied strongly on Friday, with Brent surging over $3 to hit a weekly high of 6 percent, and WTI climbing 2.3 percent for the week. The Middle East remained a top concern for investors following claims by Yemen's Houthi rebels that they had targeted fuel supply infrastructure in Saudi Arabia and Riyadh airport on the weekend.

Saudi authorities have yet to confirm the Houthi claims, though the kingdom's coalition in Yemen reported destroying three drones that had targeted Riyadh and southern regions on Monday. Earlier in the day, optimism over a potential diplomatic resolution to the conflict, sparked by US and Israeli airstrikes on Iran followed by retaliatory strikes on Saudi Arabia and Yemen, had pushed oil prices down more than $2 a barrel.

Qatar's mediators visited Tehran on Sunday alongside US officials in a bid to defuse regional tensions, while Saudi Arabia, Turkey and Pakistan held talks with Iranian officials in Tehran on Monday, marking the first high-level meetings between Iran and the three nations since they signed a mutual defense treaty in August. The outcome of the talks was the commitment to further cooperation in peace and security, according to Iranian state media.

In a separate development, Egypt's parliament gave President Abdel Fattah al-Sisi the authority to take "all necessary measures" to assist Saudi Arabia in its defense, potentially paving the way for Egyptian military involvement. The ongoing impact of the US-Israeli-Iran conflict, particularly the Strait of Hormuz and Bab el-Mandeb Strait, has led to the worst month for maritime attacks this October, with companies grappling with disruptions in commercial shipping.

A recent oil spill from a damaged tanker off the coast of the UAE has worsened, with satellite images revealing an expanding slick and raising environmental concerns. The United Kingdom Maritime Trade Operations agency reported receiving third-party reports of a vessel on fire near Al-Faw, Iraq, with details on the crew's condition and environmental impact still unclear.

Meanwhile, Russian refiners are increasing diesel output in October after the Russian government approved export quotas following a supply deal with the United States, according to industry sources. Saudi Arabia and Singapore announced plans for Saudi Aramco to begin storing crude oil in Singapore from the second half of 2027, aiming to bolster the company's regional supply chain resilience.

International Energy Agency chief Fatih Birol cautioned at a Singapore industry event that he did not anticipate energy markets returning to pre-war levels in 2027, citing ongoing supply concerns. In the United States, crude oil reserves in the Strategic Petroleum Reserve fell to 282.6 million barrels last week, the lowest level since October 1982, as reported by the Department of Energy.