Oil prices fall over 7% on Iran talks hopes - what it means for petrol in Pakistan

Oil prices fell more than 7% on Monday, 2 November, as hopes grew for a negotiated end to the US-Israeli war with Iran. Global benchmark Brent crude settled at $104.77 a barrel, down $8.66, while US crude (WTI) settled at $96.46.

For Pakistan, which imports most of its oil, the fall matters because fuel prices here are now set daily on working days. If cheaper crude holds, it can feed through to petrol and diesel, though the pump price also depends on the rupee, taxes and levies.

How much did oil prices fall?

The figures below are the settlement prices for 2 November reported by The Nation (Thailand). Yahoo Finance and a Reuters report carried by Investing.com also put the day's fall at more than 7%.

Before the drop, Brent had closed October at a six-month high. The National reported that over October, Brent gained about 15% and WTI about 12%.

Why did oil prices fall today?

Three developments drove the selling, according to the reports:

• Talk of a deal: Qatar is mediating between Iran and the United States. Iran's President Masoud Pezeshkian said the government had been given authority to pursue peace talks, and US President Donald Trump said on 2 November that a deal "could happen".
• More time for diplomacy: Axios reported that Trump wants to give diplomacy with Tehran more time before any further strikes. Iran said contact with the US over ending the war is continuing.
• Midterm timing: Markets had worried that fighting could resume after the US midterm elections on 3 November. Signs of talks eased that worry for now.

Analysts quoted by the reports were cautious. Raymond James warned of "false dawns" seen in recent months, and UBS said the market remains very sensitive to Middle East headlines.

Is the Strait of Hormuz still a risk?

Yes. Shipping through the Strait of Hormuz, the narrow sea lane that carries a large share of Gulf oil, is still disrupted. The National reported that two vessels were struck over the weekend, including one east of Ras Al Khafji on Saudi Arabia's Gulf coast.

ADNOC chief executive Sultan Al Jaber has said that nearly 1 billion barrels have been drawn from global stocks since the disruption began. That is why forecasts remain high even after Monday's fall:

These are forecasts by banks, not facts, and they change often.

Will petrol get cheaper in Pakistan?

It is too early to say. Pakistan moved to daily fuel pricing on working days, which we explained in our story on what daily fuel pricing means for business. Under the rates notified until 2 November, petrol was Rs377.91 a litre and diesel Rs402.96.

Crude is only one part of the pump price. The rest comes from the exchange rate, freight and import premiums, the petroleum levy, customs duty and dealer and company margins. The government has also changed how refinery premiums are handled, which we covered in the Rs14.71 petrol relief story.

Illustration only: one barrel holds about 159 litres. At a rate of about Rs276.69 to the dollar, Monday's $8.66 fall in Brent works out to roughly Rs15 per litre of crude oil. This is the raw crude cost, not a forecast of the pump price, because refined petrol is priced off different import benchmarks and taxes do not move with crude.

What it means for Pakistan

A sustained fall in oil prices would help Pakistan in several ways. The oil import bill is one of the biggest drains on foreign exchange, so cheaper crude eases pressure on the rupee and on reserves. Lower fuel costs also feed into transport fares, food prices and electricity generated from oil.

For families abroad, the picture is mixed. Gulf economies earn more when oil is high, which supports jobs for Pakistani workers there. A short drop like Monday's does not change that, but a long slide would be worth watching.

What to do now:

• Check prices daily: with daily pricing, rates can move on any working day. Track petrol, diesel and the dollar on our rate tracker.
• Do not panic-buy or hoard fuel: one day's market move is not a price notification.
• Plan business costs with a range: transporters and factories can budget for prices going either way while talks continue.
• Follow official notices: only the Petroleum Division and OGRA announce pump prices.

Oil markets remain volatile, and prices could rise again if talks stall. We will update our fuel stories when new rates are notified.