Brent crude oil dropped below $109 a barrel on Friday, heading for its third straight weekly loss, with diplomatic efforts over Syria and Iran helping ease worries about risks to supply from the Middle East.
The US and Russia have agreed on a draft UN Security Council resolution aimed at eliminating chemical weapons in Syria. The US and Iran also began talks to resolve a long-running standoff over Tehran’s nuclear programme.
“The geopolitical risk has been unwound a bit, but it’s still reflected in oil prices,” said Ric Spooner, chief market analyst at CMC Markets. “The most likely scenario is that prices will come down further.”
Brent crude oil for November touched a session low of $108.74 a barrel, before paring losses to trade at $108.90 a barrel early on Friday, down 31 cents.
US crude for delivery in November dropped 45 cents to $102.58 a barrel, falling for a sixth session out of seven and down nearly 2% on the week.
A Reuters poll of 32 analysts showed Br ent crude is expected to average $107.70 a barrel this year.
The North Sea benchmark, which peaked above $117 a barrel in August on concerns the war in Syria would spiral out of control and hit Middle East oil output, has traded at an average of $108.49 per barrel so far this year.
Both Brent and US light crude have shed nearly $8 a barrel from peaks hit earlier this month, with geopolitical risks in the Middle East dissipating, led by the diplomatic resolution on Syria’s chemical arsenal. The UN Security Council will vote on the resolution later on Friday.
Although Syria is not a major oil producer, any escalation of tension in the Middle East could disrupt flows from a region that supplies nearly a third of the world’s oil.
There is also growing progress between the West and Iran over the latter’s nuclear ambitions, which had prompted sanctions against Tehran. Iran and the US held their highest-level substantive talks in a generation on Thursday.
While a charm offensive by new Iranian President Hassan Rouhani has calmed some oil investors, analysts say increased Iranian crude exports are unlikely to happen any time soon.
“The path to a lasting diplomatic deal that will lead to Iranian barrels returning to the market remains quite perilous,” Barclays analyst Helima Croft said.
Iran’s envoy to the UN nuclear watchdog played down the chances of a quick breakthrough in talks on Friday with the agency on Tehran’s disputed atomic programme.
“This is the first meeting so nobody I guess should expect that in just (a) one-day meeting we can solve (our) problems,” Reza Najafi told reporters.
The West’s standoff with Iran over the Opec nation’s nuclear programme has helped support oil prices for nearly a decade. Years of sanctions have cut Iranian oil exports by more than 1 million barrels per day.
Information from Upstream was used in this report.