Oil prices fell more than 3% on Monday after Iranian and Qatari officials held a third straight day of talks aimed at securing a deal to end the U.S.-Israeli war on Iran.
Brent crude futures dropped $3.68, or 3.2%, to $109.75 a barrel by 0407 GMT, while U.S. West Texas Intermediate crude stood at $100.69 a barrel, down $3.43, or 3.3%.
Brent ended October at its highest level in six months amid concerns that the U.S.-Iran conflict could escalate again after Tuesday's U.S. midterm elections.
"Oil is seeing a technical pullback this morning after last week's strong gains," said Tim Waterer, chief market analyst at KCM Trade. "Lingering hopes of some form of diplomatic progress, combined with the absence of any meaningful military escalation over the weekend, have taken some of the immediate heat out of prices for now."
Waterer said the market remained alert to the possibility that rhetoric around Iran could intensify and push Brent toward $120 after the midterm elections.
Iranian Foreign Minister Abbas Araqchi said Sunday that the purpose of the "ongoing and progressing" talks was to continue consultations with Qatari mediators, adding that Tehran was prepared for "both defense and diplomacy."
The talks come amid attacks on oil tankers transiting the Strait of Hormuz that are driving up global energy and shipping costs. Two of three ship-tracking companies said Saudi Arabia increased crude exports in October versus September despite attacks by the Iran-aligned Yemeni Houthis on its energy infrastructure.
"The price action in oil in recent weeks reflects a market increasingly bracing for the potential for more hostilities between the U.S. and Iran," ING analysts said in a client note. "If the midterms pass with neither strikes nor a deal, the key question is whether the market continues to price in a substantial geopolitical risk premium or whether that premium gradually begins to unwind."
The Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+, kept December production targets steady on Sunday, confirming expectations that further policy adjustments will not occur until next year as the group continues to grapple with export disruptions stemming from the Iran war.
