In Focus | US-Iran de-escalation hopes squeeze out the war premium: January Brent is down 15.5% from the end of October and recovers to $95.82 amid back-and-forth talks

January Brent crude settled at $95.82 a barrel on November 12, down 15.5% from $113.43 on October 30; on November 10 it closed at $91.49, its lowest close since August 31. December WTI fell over the same period from $104.12 to $88.74, a drop of 14.8%. In late October, Houthi attacks on Saudi energy facilities pushed oil to a six-month high. In November, the US midterm results reinforced expectations of a cooling in the US-Iran conflict, President Donald Trump signaled a pause in strikes and, after meeting Qatar's prime minister, said "Iran militarily is effectively over," and Saudi output rebounded sharply in October, so the war premium was quickly unwound. The talks themselves, however, showed no substantive breakthrough: Iran insisted the US must first meet seven conditions, the US maintained its naval blockade of Iranian ports, and attacks on ships and on Saudi facilities continued. Brent rebounded on both November 11 and 12 and was up 4.7% from its November 10 settlement.

A drop of more than 15% in two weeks: Brent falls from the end of October to its lowest since the end of August

After the US and Israel struck Iran on February 28, traffic through the Strait of Hormuz was severely disrupted, and Brent crude moved back above $100 a barrel in September. In late October, the Houthis kept attacking Saudi airports and energy facilities; the front-month (December) Brent contract settled at $116.72 on October 23, which Reuters reported was the highest since April 29. On October 30, the December contract settled at $117.64 on its last trading day, while the January contract closed at $113.43; Brent gained 13.6% in October and WTI gained 15.2%. Ahead of the election, some institutions still saw escalation as the main risk: in a report on November 1, Goldman Sachs said the market was increasingly giving weight to escalation after the November 3 midterms and the potential weakness in Middle East supply that could follow, and it raised its oil price forecasts for the end of this year and for next year.

The situation then turned. According to CNBC on November 2, Iranian Foreign Minister Araghchi said mediators were discussing the proposal Iran put forward at the UN General Assembly in September, and Trump said Iran wants to reach a deal; January Brent fell 7.6% that day to $104.77. The midterm results showed Democrats taking control of both the Senate and the House, markets bet on a cooling of the US-Iran conflict, and Brent fell nearly another 9% on November 4. On a like-for-like January contract basis, Brent fell about 13% in the week of November 2 to 6, and December WTI fell about 12.8%.

In a CNN interview on November 8, Trump said that if Iran signs a very strong agreement, the need for renewed fighting is extremely low. On November 9, Brent fell $5.75 (5.85%) to $92.57, and WTI fell $3.98 (4.38%) to $86.85. TACenergy analysts said the prospect of peace encouraged selling even though actual fighting had not slowed, while Dennis Kissler, senior vice president at BOK Financial, noted that the volume of oil moving through the Strait of Hormuz remained strong, putting crude futures under pressure again. On November 10, oil fell more than $3 at the open and then recovered part of the loss; Brent closed at $91.49 and WTI at $86.04, both closing at their lowest since August 31 for a second straight session.

Unit: US dollars per barrel.

Qatari mediation advances, while the US and Iran stayed deadlocked over conditions

Qatar was the main mediator between the US and Iran. According to Reuters, citing Al Jazeera on November 7, Qatari Prime Minister Sheikh Mohammed bin Abdulrahman Al Thani said Qatar's mediation between the US and Iran was continuing and had made major progress. According to Reuters, a senior Iranian security official said Tehran had no intention of negotiating unless the US meets seven conditions listed in the June interim agreement; according to Al Jazeera, the seven conditions Iran wants the US to accept include lifting sanctions, releasing frozen Iranian funds, recognizing the new shipping lane in the Strait of Hormuz that Iran and Oman have opened together, and ending the war on all fronts, including Lebanon.

On November 9 (US local time), Trump and Vice President Vance met Sheikh Mohammed at the White House, and Trump then said in the White House briefing room: "Iran militarily is effectively over." He said the US was only maintaining the status quo, that is, continuing the greatest naval blockade in US history, and that the situation "is going to be ending fairly soon," but that US forces could act again at any time if circumstances change. Sheikh Mohammed said on social media that he was grateful for the positive discussions on reaching a deal and bringing peace to the region. Mohsen Rezaei, secretary of Iran's Supreme National Security Council, told the US to stop manufacturing fake news about "imaginary talks"; Iranian President Pezeshkian said Iran was open to further negotiations but "will not surrender to force and bullying." According to Reuters on November 10, Rezaei said in an interview with Al Mayadeen TV that no negotiations were under way between Tehran and Washington.

The US messaging was also two-sided. According to Reuters, citing four G7 diplomats, US Secretary of State Rubio said at a G7 foreign ministers' meeting in Paris on November 10 that the US will keep imposing "devastating" economic costs on Iran, that the US has options other than restarting the war or accepting Iran's demands, and that current sanctions are working. Trump also said the US will keep its naval blockade in the Strait of Hormuz in place for now and hold off on new military strikes. After his White House talks, Sheikh Mohammed made a brief visit to the Paris venue, and according to two European diplomats, he was cautiously optimistic about a diplomatic solution.

The nuclear issue then became a new point of disagreement. According to Reuters, Iran's security chief said Iran would not let enriched nuclear material leave the country, and Bloomberg cited Rezaei's remarks to Al Mayadeen TV that "not a single atom" would be shipped out; the US said the nuclear issue must be part of any initial talks aimed at ending the war. On November 11, Brent rose $1.27 (1.39%) to $92.76. After oil dropped about $1 at one point in early Asian trading on November 12, Trump posted on social media: "We've got their money, Hundreds of Billions of Dollars, and we've got their Strait!" Reuters read this as a sign that the US was saying it does not need a deal with Iran.

Saudi output recovers, while attacks around the strait and along the Red Sea continue

The recovery in supply was the other main driver of the unwinding of the premium. According to Reuters, citing OPEC's monthly report released on November 11, based on secondary-source data, OPEC+ crude output rose by about 2.04 million barrels per day to 41.23 million barrels per day in October, which Reuters calculated was 97% of the pre-war level of 42.72 million in February; Saudi Arabia reported to OPEC October output of 10.563 million barrels per day, up from 8.372 million in September and the highest since February. Reuters noted that Gulf producers were restoring exports through workarounds such as ship-to-ship transfers; citing Kpler data, Reuters said disruption to Middle East crude and condensate had fallen to about 3.8 million barrels per day, and Saudi and Iraqi crude output had returned to pre-war levels. Iraqi Foreign Minister Hussein said on November 8 that Iraq had reached an understanding with the US allowing Iraqi oil to be exported through the Strait of Hormuz via the shipping lane near Oman. Saudi Arabia's East-West Pipeline resumed operation on September 22 and was the main export route that bypasses the strait.

US pressure on Iran did not ease. US Central Command said US forces disabled a cargo ship in the Gulf of Oman on November 7 that was trying to break the blockade of Iranian ports, and on the same day announced a new task force to stop advanced weapons and sanctioned materials from moving across Iran's land borders and the Caspian Sea.

The attacks did not stop either. According to Reuters, citing data from the Washington Institute for Near East Policy, 37 vessels were attacked in October, the most in any month since the war began in February. According to Reuters on November 9, the Medina section of Saudi Arabia's East-West Pipeline was hit and caught fire; Saudi state media, citing an Energy Ministry source, said the fire had been put out, there were no casualties, and operations were not affected. The Houthis said they attacked a Saudi Aramco office building in Riyadh on November 8. According to Reuters, Iranian forces also attacked ship navigation facilities on Omani Didamar Island in the Strait of Hormuz. On November 12, the Houthis said they attacked a pumping station on Saudi Arabia's East-West Pipeline, an oil facility in the Red Sea city of Yanbu and a Saudi Aramco office building in Riyadh, and the Saudi-led coalition said it intercepted and destroyed one drone each in the Riyadh area and the Eastern Province; Iran's military said four tankers that ignored warnings exploded in the strait, which Reuters could not immediately verify. That day Brent rose $3.06 (3.3%) to $95.82, and WTI rose $2.21 (2.55%) to $88.74. Timothy Snyder, chief economist at Matador Economics, said the Iranian Revolutionary Guards' attacks on shipping are "beginning to add" to price pressure.

US inventories rose over the same period. The US Energy Information Administration (EIA) reported on November 12 (delayed by one day because of Veterans Day) that US commercial crude inventories rose by 4.66 million barrels to 414.4 million barrels in the week ended November 6, gasoline inventories rose by 1.8 million barrels, and distillate inventories rose by 4.07 million barrels; the Strategic Petroleum Reserve fell to 279.5 million barrels, which Reuters reported was the lowest since October 1982.

Pricing as of November 12: declines, spreads and positioning

At the close on November 12, January Brent was down 15.5% from October 30 and up 4.7% from its November 10 settlement, and had fallen about 2.5% cumulatively over the first four trading days of this week; December WTI was down 14.8% from October 30 and down about 2.3% this week. January Brent stood at a premium of $7.08 to December WTI.

On the term structure, on October 30 the expiring December Brent contract stood about $4.21 above the January contract, a pronounced front-month premium; according to Reuters on November 9, Morgan Stanley noted that Dated Brent had turned lower than front-month futures, indicating weakness in the physical market. JPMorgan estimated the global oil supply surplus in October at about 1.4 million barrels per day. On positioning, the report from the US Commodity Futures Trading Commission as of November 3 (the midterm election day) showed that money managers' long positions in NYMEX WTI futures fell by 10,051 contracts that week to 147,382 contracts, with short positions at 125,654 contracts; the data predate the concentrated sell-off after the election.

Of the two official monthly reports published before the cutoff, the EIA's Short-Term Energy Outlook released on November 10 (with forecasts completed on November 5) assumes that most Middle East production outside Iran will return to pre-conflict averages by the middle of next year. According to Reuters, OPEC's monthly report kept its 2026 global demand growth forecast at 180,000 barrels per day after six consecutive months of cuts, and forecasts 2027 demand growth of 2.55 million barrels to 108.3 million barrels per day.

Among analysts, Danske Bank strategist Jens Naervig Pedersen said the oil market had gone through a sharp repricing over the past two weeks. UBS analyst Giovanni Staunovo said oil prices were being supported by fading hopes of a cooling in the situation. Rebecca Babin, senior energy trader at CIBC Private Wealth, argued that the market had shifted from needing a worsening situation to rise to needing only a lack of improvement to push oil higher.

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Risk notice: This material is for reference only and does not constitute investment advice. Financial markets involve risk, and past performance does not indicate future results.