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Brent crude futures hit their lowest level since early September on Monday after US President Donald Trump downplayed the likelihood of renewed strikes on Iran, though attacks on ships near the Strait of Hormuz kept supply concerns in focus.
Trump said on Sunday that he was highly unlikely to order fresh attacks on Iran as long as talks to end the conflict progressed, even as both countries reported that shipping had been hit in or near the Strait of Hormuz.
Brent crude futures were down $5.05, or 5.2 per cent, to $93.27 a barrel by 1427 GMT, having slid as low as $93.21 a barrel earlier.
US West Texas Intermediate lost $4.12, or 4.5 per cent, to $86.71 a barrel.
The Brent benchmark plunged 16 per cent last week to touch a two-month low of $93.22, marking its steepest weekly drop since the start of the Covid-19 pandemic.
"Oil continues to trade lower on hopes of a US-Iran peace deal rather than concrete signs of progress," said Saxo Bank analyst Ole Hansen, adding that Trump's latest comments that fresh strikes on Iran are highly unlikely have increased pressure on prices.
UBS analyst Giovanni Staunovo said: "Weakness in the physical market, supported by still-elevated flows out of the Middle East, is one factor weighing on prices."
Dated Brent, used to price cargoes around the world, has weakened to a discount to the nearby Brent futures contract, Morgan Stanley said in a report on Monday, highlighting weakness in the physical market.
Trump had hinted at a resumption of attacks on Iran after last week's US midterm elections, but there has been no sign of a large-scale US military operation. Iran has said it would respond by striking US and Israeli targets.
Tim Waterer, chief analyst at KCM Trade, called Trump's comments "more measured" but said the market is still waiting to see whether the midterms have produced a lasting shift in Trump's approach to the conflict or whether this is just another temporary change in tone.
The global oil market is showing signs of a return to excess supply as demand drops because of high prices, some analysts say. JP Morgan estimated a global oil surplus of 1.4 million barrels per day (bpd) in October, the bank said in a report last week.
