Oil fell Monday on optimism of improved supplies after President Donald Trump said that Russia and Ukraine will not be targeting each other's energy facilities, while Iran reached out to Saudi Arabia after Houthi attacks against the kingdom.
Futures for international benchmark Brent crude for December delivery dropped 1.65% to $102.99 a barrel. U.S. West Texas Intermediate futures for November declined 1.92% to $90.09 per barrel.
"Effective immediately, there is an ENERGY CEASEFIRE in the War between Russia and Ukraine. Both parties have agreed. Do not break it!" Trump said in a social media statement.
Ukrainian President Volodymyr Zelenskyy said in a post on social media that "Ukraine supports the ceasefire, and it is important that Russia support it as well."
Prospects of more Russian energy hitting markets after a deal with the U.S. have also risen after Trump said Friday that Russia will supply more than 4 million tons of diesel to the global market under a deal he struck with Putin during a phone call.
According to the Saudi state news agency, Iran's Minister of Foreign Affairs Abbas Araghchi made a phone call to Saudi Arabia's Minister of Foreign Affairs Faisal bin Farhan bin Abdullah, to discuss about the region's recent escalation of events as well as the efforts to address it.
Al Jazeera reported Araghchi had said Iran was ready to provide assistance to help with the start of dialogue between Saudi Arabia and Yemen's Houthis.
Oil prices are expected to remain volatile in the near term as the U.S.-Iran conflict continues, while the impact of Hurricane Isaias on U.S. energy producers could also hurt supplies .
"The pressure on oil prices could remain on the upside as Hurricane Isaias strengthened to Category 3 with 120mph winds as it approached the US Gulf Coast, forcing energy producers to curtail offshore output," UOB said in a note on Monday.
"Separately, Houthi missile strikes on Saudi Arabia's Riyadh airport on Sat which killed 12 people and injured over 300, have materially elevated Middle East risk premia," UOB added.