By: Economy Middle east

Oil prices declined on Monday as the United States (U.S.) and Iran committed to ongoing negotiations regarding the Middle Eastern nation’s nuclear program. This diplomatic progress helped alleviate investor anxiety over a potential military conflict that could jeopardize regional energy supplies.

Brent crude futures had dropped 66 cents, or 0.97 percent, to $67.39 a barrel, reversing a 50-cent gain from the previous Friday. Similarly, U.S. West Texas Intermediate (WTI) crude fell by 58 cents, or 0.91 percent, to $62.97 a barrel, following a 26-cent increase at the end of last week.

The decision by Washington and Tehran to move forward with indirect nuclear talks followed what both parties described as constructive, albeit difficult, discussions in Oman. This news calmed fears that a breakdown in diplomacy might lead to war, particularly given the recent increase in U.S. military presence in the region. However, the situation remains precarious; on Saturday, Iran’s foreign minister warned that Tehran would target U.S. bases in the Middle East if attacked by American forces. This statement served as a reminder that the threat of armed conflict persists, specifically near the Strait of Hormuz, a vital maritime corridor through which roughly 20 percent of global oil consumption passes.

Sanctions and shifting trade

In addition to Middle Eastern tensions, investors are monitoring international efforts to limit Russia’s oil revenue. On Friday, the European Commission proposed a comprehensive ban on all services supporting Russia’s seaborne crude exports. This shift is already impacting trade patterns; Indian refiners, who previously served as the top buyers of Russian seaborne oil, are reportedly avoiding new purchases for April delivery. Sources within the trade and refining sectors suggest this avoidance could be a strategic move to help New Delhi finalize a new trade agreement with Washington.

Expanding domestic energy drilling

Reflecting the impact of higher energy prices on domestic output, the latest data from Baker Hughes indicates an increase in drilling activity. On Friday, the firm reported that U.S. energy companies added both natural gas and oil rigs for a third consecutive week. This marks the first time such a sustained increase has occurred since November, signaling that American producers are responding to current market conditions by expanding their operations.