Oil falls back on reports US backs draft Iran deal

Crude futures jumped early Tuesday, November 3, after US forces struck Iran's Qeshm Island, then fell back hard. The reversal came on reports that Washington had backed a draft memorandum of understanding that Qatari mediators presented to Tehran. Quantum Commodity Intelligence reported that crude had "rowed back sharply from early highs" on news of the new proposal. The swings show how much oil now trades on diplomatic headlines, at a time when supply from the Gulf is quietly coming back.qcintel.com

Strike lifts prices, then the MoU report

In Asian and early European trading, both Brent and US West Texas Intermediate rose more than $1 a barrel. Traders weighed the Qeshm attack alongside an Iranian official's comment that a deal to end the war was still far off. The rebound followed a drop of more than 7% in both benchmarks on Monday, when talks between Iranian and Qatari officials raised hopes of peace.reuters.com

US officials called Monday's strikes on Qeshm limited and defensive. One said they were a response to Iran firing at a US aircraft, and officials said they did not mark a return to major combat. The Wall Street Journal first reported the attack. The New York Times reported that these quiet operations are the first US bombing of Iranian targets since early September.nytimes.com+1

The gains faded later in the day. Arab media reported that Washington had approved a draft memorandum of understanding and that both sides had made concessions, which sent oil sharply lower and lifted US stock futures. Neither government has confirmed those reports. Qatar's foreign ministry spokesman, Majed al-Ansari, said both sides are reviewing Qatar's proposal and that mediators are passing proposals between them in real time.aljazeera.com+1

Physical market limits gains

Supply and demand in the physical market are also holding prices back. Middle East oil markets show near-term supply running ahead of demand for the first time since July. Combined exports from Saudi Arabia, the UAE, Iraq and Kuwait rose about 10% from the previous month, roughly back to pre-war levels, while Iranian exports have almost stopped. Dubai led Monday's sell-off with its steepest one-day fall since March.news.futunn.com+2

Demand is weakening as well. Vitol chief executive Russell Hardy said global oil demand could end the year about 3 million barrels per day below 2025 levels.qcintel.com

Wide gaps remain in talks

Tehran is still setting firm terms. Iran's armed forces chief, Major-General Ali Abdollahi, listed five conditions, including a full lifting of sanctions and recognition of Iranian sovereignty over the Strait of Hormuz. Phillip Nova analyst Priyanka Sachdeva said headlines alone are unlikely to keep prices rising. In her view, only clear evidence of supply disruption would do that.news.futunn.com+1