Oil extended the biggest decline in a week on cautious optimism about easing tensions in the Middle East and the outlook for supply.

Brent traded below $65 a barrel after closing 1.6% lower on Thursday. Israel approved a framework that would see Hamas release hostages in exchange for prisoners, a major step toward a peace agreement to end the bloody conflict in Gaza which has destabilized the Middle East.

Meanwhile, traders were on alert after the US sanctioned more than 50 individuals, firms and vessels involved in the Iranian energy trade, including a key crude-import terminal and a privately-owned Chinese refinery. It's the latest in a series of penalties this year that have targeted companies in the Asian nation. Separately, China also slapped port fees on American ships in retaliation for similar US measures.

Still, oil markets are heading for a significant surplus fueled by rising output from both outside and within the OPEC+ alliance, which agreed to raise production quotas to reclaim market share over the weekend. The broad mood remains bearish, though there are discrepancies about how gloomy crude's prospects are, according to Citigroup Inc., which summarized views from clients.

"Oil prices remain in a tight range despite continued OPEC+ unwind," Barclays analyst Amarpreet Singh wrote in a note. "Inventories are building, but not as fast as expected."

Brent for December settlement was 0.8% lower at $64.71 a barrel at 10:19 a.m. in London.

WTI for November delivery dipped 0.7% to $61.06 a barrel.

Source : Bloomberg