Brent crude fell more than 8% on Wednesday to below $95 a barrel, its lowest level in two months, as traders priced in a diplomatic path in the U.S.-Israeli war with Iran and as oil leaving the Persian Gulf began to outrun demand.

For refiners and importers in Asia, the clearest signal came from the physical market. The Dubai benchmark for Middle East crude flipped into contango early this week for the first time since July, a sign that near-term supply is plentiful. Softer Gulf prices have already drawn more buying from Asian refiners.

Brent was down 8.47% at $94.83 a barrel shortly before noon in New York, The National reported, while U.S. West Texas Intermediate was 7.5% lower at $88.88. Both benchmarks fell for a third straight session, according to Trading Economics. Brent, which closed at a six-month high on Friday, and WTI have each lost more than 15% this week, according to The National.

Iran Talks Drive Three Days of Selling

The slide began on Monday, when Brent dropped 7.6% to $104.77 after Iranian President Masoud Pezeshkian said the supreme leader had given the government more authority over peace talks, according to Oilprice.com. On Tuesday morning, Brent plunged from $107.24 to $100.80 before recovering to about $104 by midmorning in New York, as traders reacted to conflicting reports on U.S.-Iran negotiations. A senior Iranian official rejected reports of a breakthrough and said an agreement was still far off.

Traders had braced for possible escalation after Tuesday's U.S. midterm elections. President Donald Trump told the Financial Times that Washington had no immediate plans to strike Iran, Oilprice.com reported. He stressed that the United States remained ready to act if needed, according to Trading Economics. Qatar and Pakistan are mediating, and Qatari officials expect both sides to respond to proposals to end the conflict.

Both crude benchmarks traded higher early on Wednesday before reversing, Oilprice.com said. Prices fell despite limited U.S. strikes on Iran's Qeshm Island on Monday, which Washington confirmed, according to The National. Iran's Supreme Leader Mojtaba Khamenei was also reported to have said that anyone expecting a shift in U.S. policy toward Iran after the elections was "gravely mistaken."

Priyanka Sachdeva of Phillip Nova said profit-taking and a cut in speculative long positions were justified after October's rally, according to Oilprice.com. Goldman Sachs estimated, Oilprice.com reported on Monday, that a geopolitical risk premium of about $27 a barrel accounted for most of that rally, and it raised its December Brent forecast to $105 from $90. At Wednesday's prices, Brent sits roughly $10 below that forecast.

Dubai Curve Signals More Supply for Asia

The November Dubai contract traded about $2 a barrel below the December contract at the start of the week, traders and brokers told Bloomberg, according to Oilprice.com. The last time the curve showed that shape was early July, when a three-week U.S.-Iran ceasefire let tankers leave the Strait of Hormuz freely. Flows have risen over the past two months as Gulf producers shuttled cargoes through the strait and transferred them between ships in the Gulf of Oman.

Weaker Dubai and Murban prices have pulled in more orders from Asia, especially from Indian refiners, which have favored Middle East cargoes over Russian barrels that carry higher freight costs. Murban slipped $1.27 to $100.90 by midmorning in New York on Wednesday, Oilprice.com reported. India's crude imports were on track for a monthly record in October, according to Kpler estimates.

JPMorgan estimated that Middle East exports had recovered to about 20.7 million barrels a day from a March low of 9.8 million, and that the global market ran a surplus of 1.4 million barrels a day in October, up from 1.1 million in September, Oilprice.com reported. The bank said demand had fallen by 3.3 million barrels a day since the war began on Feb. 28.

The United Arab Emirates' Minister of Energy and Infrastructure, Suhail Al Mazrouei, told the Adipec conference in Abu Dhabi on Monday that the country's exports had at times topped prewar levels. Kpler data cited by The National showed UAE shipments of crude and condensate reached 3.94 million barrels a day in June, up from a record low of 2.13 million in March.

U.S. Stockpiles Keep Shrinking

The selling overrode signs of tighter U.S. supply. Commercial crude inventories declined 0.9 million barrels to 409.8 million in the week ended Oct. 30, leaving them 4% below the five-year average, the Energy Information Administration said on Wednesday. Trading Economics counted it as the fifth straight weekly decline. The American Petroleum Institute had reported a draw of 5.27 million barrels against expectations of a build, Oilprice.com said.

Distillate stocks, which include diesel and heating oil, dropped 3.6 million barrels and stood 13% below the five-year average. U.S. refineries ran at 94.5% of capacity, and crude exports fell by about 1.2 million barrels a day to 3.7 million barrels a day, the EIA data showed.

The Energy Department said it had awarded contracts to exchange 300,000 barrels of ultra-low sulfur distillate from the Northeast Home Heating Oil Reserve, with deliveries due by Nov. 6. U.S. heating oil prices fell almost 7% on Wednesday, Trading Economics data showed.

The seven core OPEC+ producers, which kept December output targets unchanged on Sunday, next meet on Nov. 29.