Oil declines as traders parse signs of fresh diplomacy on Iran

Oil prices fell on October 28 as traders analyzed recent diplomatic efforts to prevent potential US military strikes on Iran. West Texas Intermediate dipped below US$102 a barrel, following a 3% increase the previous day, while Brent closed near US$115. Iran’s Foreign Minister Abbas Araghchi indicated Tehran would continue to pursue diplomatic solutions, and US Vice-President JD Vance reportedly contacted Mohsen Rezaei, the head of the country’s top security body.

US President Donald Trump hinted at ongoing negotiations through mediators, but declined to predict their success. "Headlines like this can move prices," said a senior energy trader at CIBC Private Wealth Group, noting that any signals of communication between senior officials could prompt profit-taking and reduce the risk premium.

Brent, the global benchmark, surged 11% in October, nearing its highest level since April, driven by the ongoing conflict. The US Federal Reserve decided to maintain interest rates unchanged on October 28, but traders anticipate resuming rate hikes in December. The US midterm elections on November 3, coupled with President Trump's potential resumption of military actions against Tehran with Israel's support, add uncertainty.

Prime Minister Benjamin Netanyahu led in Israel's tightly contested election, but neither he nor opposition leader Gadi Eisenkot holds a clear path to forming a government. While physical markets showed mixed signals, Saudi Arabia maintained near wartime crude exports despite energy infrastructure attacks, and the United States saw a 1.9 million barrel decline in crude inventories, with exports hitting a five-month high.

Corporate earnings and comments from major oil producers, including Shell, TotalEnergies, ExxonMobil, and Chevron, are expected on October 29 and 30.