Oil prices plunged after posting their biggest monthly gains since 2022, as the geopolitical risk premium faded following US President Donald Trump's statement that Washington was in talks with Iran.
Brent crude traded near $67 a barrel, after rising 16% over the past month, while U.S. West Texas Intermediate crude held above $63.
Trump downplayed threats by Iranian Supreme Leader Ali Khamenei of a regional war over the weekend, reiterating that he was optimistic about the possibility of reaching an agreement.
Harris Khurshid, chief investment officer at Carobar Capital, said the downward move looked more like a market repositioning than a shift in fundamentals.
He added: In the absence of a new supply shock, oil is giving up part of its risk premium as the market reassesses its pricing in near-term disruptions that did not materialize.
Geopolitical developments and commodity markets
Ukrainian President Volodymyr Zelensky announced that the next trilateral meeting between the United States, Russia, and Ukraine will be held on February 4 and 5 in Abu Dhabi. Previous talks have made little progress toward ending the war, which is about to enter its fifth year and has led to sanctions on Russian oil exports.
Oil prices had risen after weeks of escalating tensions that brought Iran and the United States to the brink of conflict, following threats by Trump in January to launch an attack over Tehran's bloody crackdown on protests.
This has increased the risk of supply disruptions in the region, which provides about a third of the world's crude production, and shifted the focus away from a growing global glut.
In contrast, the OPEC+ alliance maintained its plans to freeze production levels in March, the final month of the three-month freeze previously announced by the alliance, even after the recent price surge.
Traders also watched a sharp correction in precious metals, with gold and silver prices continuing one of their worst downward spirals in history. Silver lost 26% last Friday, while gold fell 9%.
