Brent crude oil futures dropped more than 5 percent on Monday, trading below 66 dollars per barrel as investors responded to signals of reduced geopolitical risk in the Middle East and the Organization of the Petroleum Exporting Countries and allies’ (OPEC+) decision to maintain production levels. The decline extended losses from Friday when oil prices retreated from multi-month highs reached earlier in January 2026.
Brent crude traded at approximately 65.13 dollars per barrel on Monday, 3 February 2026, down from 67.32 dollars on 1 February 2026, according to Trading Economics. The drop followed reports over the weekend indicating progress in United States (US) and Iran negotiations, with both sides signaling that discussions were advancing toward a potential diplomatic agreement.
Iran’s top security official, Ali Larijani, head of Iran’s Supreme National Security Council, stated on Saturday that progress had been made toward negotiations with the United States. He noted that contrary to media speculation about conflict, structural arrangements for negotiations were progressing. US President Donald Trump confirmed on Saturday aboard Air Force One that Iran was seriously talking to Washington, though he maintained that US naval forces remained positioned in the region.
Iranian Foreign Minister Abbas Araghchi told CNN on Sunday that he was confident a deal could be achieved with the United States on Tehran’s nuclear program. He stated that the exchange of messages through friendly countries in the region was facilitating fruitful talks with the US. The diplomatic developments marked a shift from late January when escalating confrontations, threats of military action and warnings of retaliation had fueled market fears of supply disruptions.
Additional reassurance came as reports indicated Iran’s Islamic Revolutionary Guard Corps (IRGC) had no immediate plans to conduct live fire exercises in the Strait of Hormuz, a critical waterway through which approximately one third of seaborne traded oil passes daily. The US Central Command (CENTCOM) had previously warned Iran’s IRGC over plans to hold a two day naval exercise in the strait, raising concerns about potential disruptions to global energy flows.
Oil prices had surged earlier in January following renewed US threats against Iran. Brent crude reached approximately 70.50 dollars per barrel on 30 January 2026, the highest intraday level since September 2025 and nearing the strongest close since August 2025, as geopolitical risk premiums increased. President Trump warned Iran to agree to a nuclear deal or face military strikes, stating US naval forces in the region were prepared to act if necessary.
OPEC+ on Sunday, 2 February 2026, reaffirmed its earlier decision to keep production unchanged in March, the final month of its three month supply freeze. Eight core OPEC+ members, including Saudi Arabia, Russia, the United Arab Emirates (UAE), Iraq, Kuwait, Kazakhstan, Algeria and Oman, confirmed their commitment to pause production increases originally announced on 2 November 2025. The group cited seasonally weaker demand during the Northern Hemisphere winter as justification for maintaining steady output.
The eight producers collectively account for more than half of global oil production, producing over 33 million barrels per day. In 2025, the group raised its collective production targets by approximately 2.9 million barrels per day, equivalent to nearly 3 percent of global demand, as part of a strategy to regain market share after several years of voluntary output cuts aimed at supporting prices. The group paused planned increases for January, February and March 2026 due to seasonality.
Market analysts stated that the combination of easing geopolitical concerns and continued production discipline created a volatile trading environment, prompting traders to unwind positions and take profits following the earlier rally. The decline was compounded by profit taking after a prolonged advance that had pushed gold and other commodities to record highs alongside oil’s gains.
Brent’s rally through 2025 and into early 2026 had been driven by strong central bank buying, heightened geopolitical and economic uncertainty, and fears over the Federal Reserve’s independence. Oil prices were also supported by geopolitical tensions in Venezuela, production outages in Kazakhstan, US production freeze offs, and tightening US restrictions on purchases of Russian oil. These factors pushed prices higher in early 2026 despite widespread expectations of oversupply.
The International Energy Agency (IEA) forecasts a record oil surplus in 2026 as supplies swell from both OPEC+ and its competitors while demand growth slows. The IEA projects a 3.8 million barrels per day oil surplus in 2026, slightly below prior forecasts. Brent futures settled near 61 dollars per barrel at the end of January, having declined 18 percent in 2025 in the biggest annual drop since the 2020 pandemic.
Despite Sunday’s reaffirmation of the production freeze, OPEC+ delegates emphasized that the group retains full flexibility to continue pausing or reverse additional voluntary production adjustments, including the 2.2 million barrels per day of cuts announced in November 2023. The eight countries confirmed their intention to fully compensate for any overproduced volume since January 2024, with compliance to be monitored by the Joint Ministerial Monitoring Committee (JMMC). The group agreed to continue holding monthly meetings to review market conditions.
Jorge Leon, former OPEC official and current head of geopolitical analysis at Rystad Energy, stated that with rising uncertainty around Iran and US tensions, the group is keeping all options firmly on the table. He noted that OPEC’s own numbers point to a lower call on OPEC+ crude in the second quarter, which could limit the scope for production increases beyond March 2026.
