Oil prices pulled back as a fresh round of diplomatic efforts in the Middle East stripped away some of the risk premium tied to the possibility that the United States could resume military strikes against Iran.
The December Brent contract, set to expire Friday, declined and traded near $115 a barrel. The more actively traded January contract settled at about $111. Reports indicated that U.S. Vice President Vance had made contact with Mohsen Rezaee, secretary of Iran's top security body. Iranian Foreign Minister Araghchi said room remains for a diplomatic solution to succeed, easing market worries about further supply disruptions in the Middle East.
Since the United States and Israel launched the war in late February, diplomatic contacts between Washington and Tehran have been intermittent, with negotiations repeatedly breaking down. U.S. President Trump confirmed that Vance had sent a letter to a hardline Iranian official, but said the move focused on providing medical supplies. The consultations come ahead of the U.S. midterm elections, and the market is also watching the outcome of this week's Israeli election. Both votes will shape the future course of the war.
"News about negotiations over a possible deal keeps coming, putting pressure on the crude market," said Ryan McKay, senior commodity strategist at TD Securities. "We expect this to continue through the U.S. midterm elections, but we don't think Iran will agree to a deal on the eve of such a tense election."
December WTI fell 0.8% to settle at $102 a barrel; the December Brent contract expiring Friday dropped 0.4% to settle at $114.88 a barrel; and the more active January contract declined 0.8% to settle at $110.80 a barrel.
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