Global oil prices extended their steepest weekly decline since April 2020 on Monday, with Brent crude falling towards $97 per barrel after shedding more than 16 per cent last week, as growing expectations of a diplomatic resolution to the conflict between the United States and Iran eased concerns about prolonged disruptions to global oil supplies.
West Texas Intermediate (WTI), the US crude benchmark, also traded around $91 per barrel, reflecting a broad retreat in international oil prices following weeks of geopolitical uncertainty and heightened supply concerns.
The latest decline extends the reversal from a six-month high recorded towards the end of October, as changing political developments in the United States and renewed diplomatic expectations influenced market sentiment.
According to Bloomberg, expectations that tensions between Washington and Tehran could ease following the Democratic Party’s sweeping victories in the US midterm elections helped strengthen hopes that the conflict would not escalate further.
However, conflicting statements from senior US officials have continued to create uncertainty over the possibility of a lasting diplomatic agreement.
The movement in oil prices is particularly significant for major oil-producing economies, including Nigeria, where crude oil remains a major source of foreign exchange earnings and government revenue.
Uncertainty surrounding negotiations between the United States and Iran remains a major factor influencing global oil market movements.
US Secretary of State Marco Rubio played down expectations of an imminent breakthrough in negotiations, describing some of Tehran’s demands as unacceptable and, in certain cases, “outrageous and ridiculous.”
His comments contrasted with the more conciliatory position expressed by US President Donald Trump, who reportedly indicated that further military strikes against Iran were highly unlikely if diplomatic negotiations made substantial progress.
The conflicting signals have left oil traders assessing whether diplomatic efforts can produce a sustainable agreement capable of reducing geopolitical risks and restoring confidence in global energy supplies.
The US-Iran conflict has disrupted energy exports from the Persian Gulf, raising concerns about the availability and movement of crude oil through some of the world’s most important shipping routes.
Although hopes of de-escalation have contributed to the recent price decline, market participants remain cautious about the possibility of renewed military confrontation.
Despite the recent decline in crude prices, security risks surrounding critical Middle Eastern energy infrastructure and international shipping routes remain elevated.
The United Kingdom Maritime Trade Operations (UKMTO) reported that a tanker was struck by an unidentified projectile over the weekend while travelling outbound through the Strait of Hormuz.
The waterway is one of the world’s most strategically important oil transportation corridors, serving as a major route for crude oil and other petroleum shipments from the Persian Gulf to international markets.
Any prolonged disruption to shipping activities in the area could significantly affect global energy supplies and trigger renewed increases in crude prices.
In another development, Yemen’s Iran-backed Houthi rebels damaged offices belonging to Saudi Aramco, Saudi Arabia’s state-owned oil company, in Riyadh.
Saudi forces subsequently retaliated by destroying two missile launchers.
The incidents have reinforced concerns that renewed hostilities could threaten energy infrastructure, disrupt crude shipments and reverse the recent decline in international oil prices.
Jorge Leon, Head of Geopolitical Analysis at Rystad Energy AS, warned that the Democratic Party’s victories in the US midterm elections do not necessarily mean that a diplomatic breakthrough is closer.
“More pressure for a deal doesn’t necessarily mean a deal is closer,” Leon said.
He cautioned that any renewed escalation could quickly reverse a significant portion of the recent decline in crude prices.
Meanwhile, crude oil exports from the Persian Gulf have recovered to levels approaching those recorded before the conflict, despite continued security concerns surrounding vessels travelling through the Strait of Hormuz.
According to a Bloomberg survey, production by members of the Organisation of the Petroleum Exporting Countries (OPEC) increased last month to approximately 88 per cent of the volume recorded by the same producers in February.
However, Iranian oil production declined following the imposition of a US naval blockade, introducing further uncertainty into global supply expectations.
Vivek Dhar, a commodities analyst at Commonwealth Bank of Australia, said the removal of the blockade could trigger additional declines in crude prices.
He projected that Brent crude could fall to between $70 and $85 per barrel if a diplomatic agreement leads to the lifting of the blockade.
According to Dhar, the global oil benchmark continues to carry a geopolitical risk premium, reflecting the possibility of renewed military confrontation between Washington and Tehran.
The potential removal of supply restrictions could therefore increase the volume of crude available to international markets, putting further downward pressure on prices.
Beyond the Middle East, developments in the Russia-Ukraine conflict are also influencing global energy market expectations.
Ukraine reportedly struck a sixth Russian oil refinery within one week, intensifying its campaign against energy infrastructure that contributes to financing Moscow’s military operations.
The latest attack comes as diplomatic efforts to end the Russia-Ukraine war gather momentum.
Russia is preparing to send a high-level delegation, including Deputy Foreign Ministers Sergei Ryabkov and Mikhail Galuzin, to US-mediated negotiations with Ukraine in Abu Dhabi beginning Tuesday.
The proposed delegation signals Moscow’s willingness to participate in further diplomatic discussions following months of stalled negotiations.
However, continued attacks on oil infrastructure remain a potential source of uncertainty for global petroleum markets, particularly if they affect refining capacity, transportation networks and the availability of petroleum products.
Investors and energy market participants will also be monitoring upcoming monthly oil market reports from three major international forecasting agencies.
The United States Energy Information Administration (EIA) is scheduled to release its report on Tuesday, followed by OPEC on Wednesday and the International Energy Agency (IEA) on Friday.
The reports are expected to provide updated assessments of global oil production, consumption, inventory levels and supply-demand expectations.
Their findings could influence market sentiment, particularly as traders attempt to determine whether the recent decline in crude prices reflects a sustained improvement in supply conditions or a temporary reaction to diplomatic optimism.
The decline in international crude oil prices carries important implications for Nigeria, whose public finances and foreign exchange earnings remain significantly influenced by petroleum exports.
A sustained reduction in oil prices could put pressure on government revenue, foreign exchange inflows and the resources available to fund public expenditure.
However, the impact on Nigeria’s economy will also depend on domestic crude oil production levels, export volumes, production costs, exchange rate movements and the government’s ability to meet its budgetary oil assumptions.
Lower global oil prices could also offer some relief to fuel importers and businesses exposed to petroleum-related costs, although the extent of any benefit will depend on domestic pricing, exchange rate conditions and supply arrangements.
For the Federal Government, the latest market movement reinforces the importance of improving crude oil production, strengthening energy infrastructure and reducing excessive dependence on volatile international petroleum prices.
With Brent crude approaching $97 per barrel after its largest weekly decline in more than six years, global energy markets remain caught between growing diplomatic optimism and persistent geopolitical risks.
The direction of oil prices in the coming days will largely depend on developments in US-Iran negotiations, the security of Persian Gulf shipping routes, Russian energy infrastructure attacks and fresh assessments of global supply and demand.
