Oil prices drop more than $1 as hopes for Iran, Ukraine peace talks pressure markets

By Yuka Obayashi

TOKYO, Nov 12 (Reuters) - Oil prices dropped more than $1 on Thursday as hopes for progress in peace talks over the Middle East and the Russia-Ukraine wars pressured the market.

Brent futures lost $1.14, or 1.2%, to $91.62 a barrel by 0141 GMT. US West Texas Intermediate (WTI) crude futures fell $1.04, or 1.2%, to $85.49. Brent rose about 1.4% and WTI 0.6% on Wednesday after hitting two-month lows the previous day.

"Markets are falling on expectations that behind-the-scenes efforts are underway to secure a ceasefire between Russia and Ukraine and that it is unlikely the Iran war will escalate ahead of the US-China summit next week," said Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, a unit of Nissan Securities.

"However, given the uncertainty surrounding the Strait of Hormuz, the markets are unlikely to suffer a significant collapse," Kikukawa said.

Russian and Ukrainian negotiators agreed to a major prisoner exchange at two days of peace talks in Abu Dhabi that ended on Wednesday, although US mediators said differences remained on other major issues, including territory.

Ukrainian President Volodymyr Zelenskiy said Kyiv hoped to achieve concrete results on resolving the war this year.

Meanwhile, Iran will not allow even a single particle of enriched nuclear material to leave the country and there will be consequences if US launches new strikes, Iranian security chief Mohsen Rezaei said in televised remarks.

Washington has said nuclear issues must be part of any initial negotiations with Iran aimed at ending the eight-month-old war, while US officials downplayed the need for further military strikes.

OPEC+ crude oil production jumped in October, led by a sharp increase in output from Saudi Arabia despite continued disruption to shipments through the Hormuz Strait.

US crude stocks rose by 9 million barrels in the latest week, market sources said, citing data from the American Petroleum Institute. Official data from the US Energy Information Administration is due on Thursday, delayed a day due to a US national holiday on Wednesday. [EIA/S] [API/S]

(Reporting by Yuka Obayashi; Editing by Tom Hogue)