Oil Drops as Investors Watch for U.S.-Iran Diplomatic Moves
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(Investing) – Crude prices slipped on Tuesday as stalled diplomatic efforts between the U.S. and Iran kept supply disruption risks in the Middle East at the forefront, overshadowing a rebound in regional oil exports.
By 09:21 ET (13:21 GMT), Brent crude had fallen 2.0% to $103.14 per barrel, while WTI crude dropped 2.3% to $90.44 per barrel.
“Oil prices started the morning relatively flat but began to trend downward as the day continued. Market participants are closely watching for any signs of diplomatic progress as U.S. and Iranian representatives engage with mediators to resolve ongoing tensions,” noted David Morrison, Senior Market Analyst at Trade Nation.
In the previous session, Brent futures neared $109 per barrel before settling around $105. High energy costs have contributed to a recent selloff in the bond market, driven by fears that an energy shock could fuel inflation and prompt central banks to implement further interest rate hikes.
According to a Monday report from Reuters citing sources, Qatari mediators were scheduled to conduct separate discussions with Iranian and U.S. officials. These talks centered on a revised seven-day proposal submitted by Iran last week. However, both sides expressed doubt about reaching a resolution ahead of the upcoming U.S. midterm elections.
Even with the ongoing political gridlock, physical crude flows out of the Middle East have shown signs of recovery.
Preliminary data from Kpler indicated that crude shipments from major regional exporters climbed to 12.8 million barrels per day in September, marking the highest volume since February.
The export boost was largely driven by Saudi Arabia and the United Arab Emirates. Saudi shipments through the Strait of Hormuz spiked this month after Riyadh redirected supplies away from the Red Sea port of Yanbu due to damage on its East-West pipeline.
The Wall Street Journal reported that Saudi Arabia has since completed repairs on the pipeline and resumed Yanbu exports, restoring a crucial bypass route around the Strait of Hormuz. While the pipeline has a maximum capacity of 7 million barrels per day, approximately 3.5 million bpd was flowing through it following the restart.
However, the increased export volumes have not entirely calmed market anxieties, as shipping crude around the Gulf remains both expensive and logistically challenging.
These supply challenges have also squeezed refined-product markets. With diesel prices hitting record highs, Reuters reported that the White House is considering regulatory adjustments to expand the sale of red-dyed diesel. Meanwhile, rumors of potential U.S. diesel export curbs have further impacted market spreads.
(Reporting by Scott Kanowsky)
