Oil prices drop more than $1 as hopes for Iran, Ukraine peace talks pressure markets

Oil prices tumbled by over $1 on Thursday as optimism surrounding peace negotiations in Iran, Ukraine, and the Russia-Ukraine conflict pressured the market. Brent futures fell $1.14, or 1.2%, to $91.62 a barrel, while US West Texas Intermediate (WTI) crude futures declined $1.04, or 1.2%, to $85.49. Earlier, oil prices had risen by about 1.4% and 0.6%, respectively, after reaching two-month lows the previous day.

Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, suggested the market was falling due to expectations of a ceasefire between Russia and Ukraine and an unlikely escalation of the Iran war before the upcoming US-China summit. However, the possibility of a significant collapse remained low due to uncertainty surrounding the Strait of Hormuz, according to Kikukawa.

The two-day peace talks in Abu Dhabi ended on Wednesday, with Russian and Ukrainian negotiators agreeing on a prisoner exchange, though US mediators noted ongoing disagreements on key issues such as territory. Ukrainian President Volodymyr Zelenskiy expressed hope for achieving substantial progress in resolving the war this year.

Meanwhile, Iranian security chief Mohsen Rezaei warned that Iran would not permit any enriched nuclear material to leave the country, indicating potential consequences if the US launched further strikes. Washington emphasized that nuclear issues must be part of initial negotiations with Iran to end the eight-month war, while US officials downplayed the need for additional military strikes.

OPEC+ crude oil production surged in October, driven by a significant increase in output from Saudi Arabia despite disruptions to shipments through the Hormuz Strait. US crude stocks increased by 9 million barrels in the latest week, as per data from the American Petroleum Institute, though official figures from the US Energy Information Administration were delayed due to a national holiday on Wednesday.