By Alex Lawler
LONDON, Nov 2 (Reuters) - Oil fell about 6% on Monday as talks between Iranian and Qatari officials on ending the US-Israeli war with Iran lifted hopes for reduced Middle East supply disruptions, while Iran's president said the supreme leader had granted the government "certain authorities" regarding peace talks.
Iranian negotiators held days of talks with Qatari mediators aimed at ending the war with the United States, and a draft proposal is being circulated with a follow-up meeting
possible, an official briefed on the talks said on Monday.
Brent crude futures fell $6.78, or 6.0%, to $106.65 a barrel by 1357 GMT, while US West Texas Intermediate crude was down $6.37, or 6.1%, at $97.75.
The contracts fell as low as $105.86 and $97.12, respectively, after Iranian President Masoud Pezeshkian said that Supreme Leader Ayatollah Mojtaba Khamenei had granted the government certain authorities for peace talks, boosting expectations of a diplomatic breakthrough, analysts said.
Pezeshkian added Tehran "will try to resolve the problem with dialogue", without elaborating, according to state media.
Brent ended October at its highest in six months on concerns that the Middle East conflict could escalate again after Tuesday's US midterm elections.
"The oil market is still reacting with extreme sensitivity to every headline out of the Middle East," UBS analyst Giovanni Staunovo said. "While fears of an imminent escalation pushed prices up last week, they have dropped sharply at the start of this week as diplomatic talks between the US and Iran continue," he added.
Iranian Foreign Minister Abbas Araqchi said on Sunday that the purpose of the talks was to continue consultations with the Qatari mediators, adding that Tehran was prepared for "both defence and diplomacy".
The talks followed a recent increase in attacks on oil tankers passing the Strait of Hormuz, though there have also been signs of shipments rising from some major exporters.
Saudi Arabia's crude exports increased in October compared with September, two of three ship-tracking companies said, despite attacks by Iran-aligned Yemeni Houthis on its energy infrastructure.
The outbreak of the Iran war at the end of February has depleted oil stocks. The world has drained nearly 1 billion barrels from inventories since the war disrupted shipping through the Strait of Hormuz, said Sultan Al Jaber, chief executive of ADNOC, Abu Dhabi's state-owned oil company.
Oil could rise further, some analysts say. Goldman Sachs raised its price forecasts on Sunday owing to elevated supply risks and said Brent could jump to $140 in 2027 if Gulf oil output remains 3.5 million barrels per day below its 2025 average.
"Intensified shipping attacks, damage to oil infrastructure, and a more persistent risk premium remain the key triggers of potential upside," the bank said in a report.
(Reporting by Alex LawlerAdditional reporting by Ahmad Ghaddar, Florence Tan and Trixie YapEditing by Louise Heavens, David Goodman and Xevi Fontdegloria)
