Brent crude settles down 7.63% at $104.77 a barrel

Brent crude futures settled at $104.77 a barrel on 2 November, down $8.66, or 7.63%, from the previous settlement. The fall followed Tehran’s statement that contacts with the United States to end their war were continuing, although days of talks with Qatari mediators had produced no breakthrough.

The decline followed a 13.6% rise in October, when Brent ended the month at its highest in six months amid concern that the conflict could escalate again after the US midterm elections.

The war began in late February and sharply reduced traffic through the Strait of Hormuz, a shipping route that previously carried about a fifth of global crude oil and natural gas supplies.

Analysis

Prices rebound after reported strike

UBS analyst Giovanni Staunovo linked Monday’s sharp decline to continuing US-Iran talks, contrasting it with the previous week’s rise on fears of an imminent escalation. KCM Trade chief market analyst Tim Waterer also pointed to hopes of diplomatic progress and what he described as a lack of meaningful military escalation over the weekend.

The oil-price decline lifted airline shares and lowered government borrowing costs, raising hopes of relief from inflationary pressure. The yield on 10-year UK bonds fell 10 basis points, or 0.1 percentage point, to its lowest since 22 September. British Airways parent IAG rose 4.2% in London, while United Airlines gained 7% in New York.

By 01:04 GMT on 3 November (05:04 Yerevan time), Brent had risen 48 cents, or 0.5%, to $105.25 a barrel in early Asian trading. That was a price during the session, not Tuesday’s settlement.

The Wall Street Journal said, citing US officials, that the US had struck Iran’s Qeshm Island. Some officials described the attacks as defensive measures to prevent Iran from attacking commercial ships in the strait. Waterer said the report had added a risk premium—the extra amount traders pay to account for risk—back into the oil price. He said it had changed the market’s tone just as traders were starting to price in a more diplomatic path.