MONTREAL (Oil Monster): Oil prices moved higher Wednesday as stalled U.S.-Iran diplomacy and continued tightness in fuel markets outweighed signs of recovering crude supply from the Middle East.
Brent crude's November contract, which expires Wednesday, was up 60 cents, or 0.6%, at $103.19 per barrel by 1251 GMT. The more actively traded December contract gained $1.62, or 1.7%, to $97.78.
U.S. West Texas Intermediate crude rose $1.19, or 1.3%, to $90.57 per barrel.
Oil markets remain highly sensitive to developments between Washington and Tehran as Qatar continues shuttle diplomacy aimed at finding common ground between the two sides.
Qatari officials said Tuesday they remained hopeful that indirect discussions could produce a diplomatic breakthrough.
The talks have yet to produce an agreement, however, and uncertainty over sanctions, Iran's nuclear program and regional energy flows continues to support a geopolitical risk premium in crude markets.
President Donald Trump also denied reports that his administration was prepared to offer Iran sanctions relief or release frozen Iranian funds in exchange for concrete steps by Tehran on its nuclear program.
Trump wrote on Truth Social that the report was untrue and said he had offered Iran nothing.
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The renewed rise in crude prices comes despite improving physical oil flows from the Middle East.
Saudi Arabia resumed tanker loadings from its Red Sea port of Yanbu on Tuesday after restarting operations on the East-West Pipeline.
The pipeline provides Saudi Arabia with an alternative export route that bypasses the Strait of Hormuz and has become increasingly important during the conflict.
Goldman Sachs estimated Gulf oil exports had recovered to approximately 23.3 million barrels per day over the past week, broadly in line with their 2025 average.
JPMorgan separately estimated that the 10-day average for total oil exports had held around 20.5 million bpd during the past five days, representing about 89% of 2025 levels.
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Despite sharp day-to-day swings, crude remains on course for a strong monthly advance.
Brent is headed for a gain of approximately 14% in September, its largest monthly increase since July. WTI is on track to rise about 5.5%.
The spread between the two benchmarks has also widened to its largest level in four months.
One factor behind the divergence is uncertainty over potential U.S. measures affecting diesel exports. Restrictions could leave more fuel inside the United States, potentially reducing refinery incentives to process crude and weighing more heavily on WTI.
The White House has been considering several options aimed at easing high diesel prices without imposing a broad export restriction.
One option under consideration would allow wider sales of red-dyed diesel, which is generally used for off-road purposes and receives different tax treatment from conventional highway diesel.
The administration has also urged European Union countries to consider releasing emergency diesel inventories as tight refined-product markets continue to pressure fuel prices.
Oil analysts continue to warn that while crude flows are recovering, shortages in refined products and elevated transportation costs are keeping the wider energy market tight.
The recovery in headline export volumes does not mean Middle East oil logistics have returned to normal.
Freight, insurance and transportation costs remain elevated, while some producers continue to rely on longer or less efficient export routes.
The Strait of Hormuz also remains a major source of uncertainty because of its importance to crude oil, refined products and LNG shipments from Gulf producers.
That combination is helping keep crude prices elevated even as more barrels return to the market.
U.S. crude oil and gasoline inventories increased last week while distillate stocks declined, according to market sources citing preliminary data from the American Petroleum Institute.
API data indicated crude stocks rose by approximately 1.02 million barrels during the week ended September 25.
Official U.S. Energy Information Administration inventory data is scheduled for release at 10:30 a.m. EDT Wednesday.
Analysts surveyed by Reuters expect crude and petroleum-product inventories to have declined.
Crude prices remain caught between improving physical supply and unresolved geopolitical risk.
Further recovery in Gulf exports could ease pressure on prices, particularly if shipping conditions improve and alternative export routes remain operational.
At the same time, developments in U.S.-Iran negotiations, the Strait of Hormuz and global diesel markets could quickly change the supply outlook.
Oil traders will also be watching Sunday's OPEC+ meeting. Reuters reported that producers are expected to maintain current output targets for November.
Courtesy: www.reuters.com
