LONDON, Feb 2 — Oil prices fell five per cent on Monday, after United States (US) President Donald Trump said Iran was "seriously talking" with Washington, signalling de-escalation with an Organisation of the Petroleum Exporting Countries (OPEC) member to ease supply disruption concerns.
Brent crude futures were down US$3.63, or 5.2 per cent, at US$65.69 per barrel at 0920 GMT. U.S. West Texas Intermediate crude fell US$3.60, or 5.5 per cent, to US$61.61 per barrel.
Brent and WTI fell after posting their biggest monthly gains since 2022 in January, as the risk of a military strike on Iran receded following Trump's weekend comments. Brent gained 16 per cent in January, while WTI rose by 13 per cent.
UBS analyst Giovanni Staunovo said that the lack of further escalation of tensions in the Middle East, along with declining supply disruptions in the US and Kazakhstan, weighed on oil prices.
On Saturday, Trump told the media that Iran was "seriously talking," hours after Tehran's top security official Ali Larijani said arrangements for negotiations were underway.
He had repeatedly threatened Iran with intervention if it did not agree to a nuclear deal or continued killing protesters. Phillip Nova analyst Priyanka Sachdeva noted that the persistent threats have underpinned oil prices throughout January.
The slump was also driven by a broader commodities market selloff, with deep losses in gold and silver, which analysts partially attributed to a stronger US dollar.
"The recent pullback has also been reinforced by renewed strength in the US dollar, which typically makes dollar-denominated oil more expensive for non-US buyers, further weighing on prices," she said.
Analysts remarked that concerns about global oil supply exceeding demand also came back into focus following the de-escalation in the Middle East.
At a meeting on Sunday, OPEC+ agreed to keep its oil output unchanged for March. In November, the grouping had frozen further planned increases for January through March 2026 because of seasonally weaker consumption.
"Geopolitical risks mask a fundamentally bearish oil market. The historical example of last year's 12-day war (between Israel and Iran), and a well-supplied oil market, will still bear down on Brent crude prices by end-2026," Capital Economics said in a note on January 30.
