Oil Stabilizes Near $96 After Slump on Hopes for US-Iran Talks to End War

International oil prices stabilized around $96 a barrel after plunging on hopes that the US and Iran could hold talks to end the war.

Bloomberg reported on Nov. 2 that West Texas Intermediate traded near $96 a barrel after dropping 7.4% the previous day, its steepest one-day decline in more than three months. Brent crude, the international benchmark, also fell below $105 a barrel a day earlier.

The drop in oil prices was driven by signals from Washington and Tehran that a diplomatic resolution to end the war may be possible. Iran's president said he had been granted additional authority by the country's supreme leader to pursue negotiations. US President Donald Trump also indicated there could be progress in talks between the two countries.

On Nov. 2, Trump shook his head and gave a negative response when reporters asked whether he would resume attacks on Iran after the US midterm elections. He had previously mentioned the possibility of renewed military action after the election several times.

Still, it remains unclear whether the two sides will reach an agreement. The US and Iran had pointed to the possibility of diplomatic progress during the war, but no substantive deal was reached. Oil prices could rise again depending on the direction of the US military response after the midterm elections.

Karen Young, a senior research scholar at Columbia University's Center on Global Energy Policy, said the recent drop in oil prices was unusual given the current level of geopolitical tension. Prices could surge again if the US and Israel expand military strikes on Iran, she said.

Brent had climbed to its highest level in six months last month on concerns that armed conflict between the US and Iran could resume. Geopolitical risks continued to support prices even as oil exports from the Persian Gulf recovered.

The previous day's sharp drop in crude also rippled through other energy markets. European natural gas futures fell about 9%, while US heating oil posted its biggest decline in six months.