Global crude oil prices extended their decline as renewed expectations of diplomatic progress between the United States and Iran eased geopolitical risk premiums, outweighing concerns over continuing military tensions and disruptions to Middle Eastern oil supplies.
As at the time of writing 5:50 am (WAT), Brent crude futures had fallen 2.18% to $102.8 per barrel, while US West Texas Intermediate (WTI) declined 1.4% to $95.18 per barrel.
The decline followed reports of growing momentum in Qatar-mediated negotiations between Washington and Tehran, raising expectations that the conflict could move towards a diplomatic resolution. According to Oilprice.com, Brent slipped below $105 per barrel during Tuesday's trading session as investors reassessed the likelihood of further escalation.
However, Tehran subsequently dismissed reports suggesting significant progress in the negotiations, maintaining uncertainty over the prospects of a lasting agreement. The diplomatic developments came against the backdrop of continued military activity, including reported US strikes on Iran's Qeshm Island.
The market reaction reflects how expectations of de-escalation have begun reducing the geopolitical risk premium previously embedded in crude prices. However, the possibility of renewed hostilities continues to expose the market to sharp price movements, particularly given the importance of Middle Eastern supply routes to global energy trade.
Oilprice.com also reported that the steep backwardation across global crude benchmarks had started flattening as traders responded to the diplomatic developments. The Dubai M1-M3 structure was approaching zero, indicating reduced immediate supply tightness and easing expectations of near-term scarcity.
Despite the improving market outlook, physical supply constraints remain significant. Global crude oil held on water reached approximately 1.3 billion barrels in early November, increasing by 50 million barrels within two weeks. Middle Eastern countries accounted for about 80% of the increase, reflecting efforts to maximise exports amid uncertainty over a possible resumption of hostilities.
Meanwhile, OPEC+ maintained its November production quotas into December at 31.01 million barrels per day for its seven remaining core members. However, actual production remained 4.21 million barrels per day below the agreed target, as conflict-related constraints continued to affect physical supply.
For Nigeria, the latest price movement presents a mixed outlook. Lower international crude prices could ease some pressure on domestic petroleum product procurement costs, although freight rates, insurance premiums, exchange rates and refined product benchmarks will continue influencing local fuel prices.
The market's next direction will largely depend on whether diplomatic engagements between Washington and Tehran produce a credible agreement, or renewed military escalation restores the geopolitical risk premium. Until then, crude oil prices are likely to remain sensitive to developments across the Middle East and their implications for global supply security.