Oil prices recover after steep losses earlier this week

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Oil prices recover

Highlights

Brent traded at $100 and WTI at $90.
Saudi Arabia has restarted its East-West Pipeline.
European diesel refining margins reached a record high.

November Brent futures traded at $100.34 a barrel, up 1.10%, while November WTI futures stood at $90.63, up 0.12%, according to the latest market data provided. The recovery followed sharp declines that took Brent as low as $97.36 in the previous session and pushed WTI to its lowest level since Sept. 1, Reuters reports.

Gulf supplies ease pressure on crude

Saudi Arabia has restarted operations on its East-West Pipeline, restoring a crucial route between eastern oil fields and the Red Sea. The pipeline had been shut after drone attacks on Sept. 11 halted crude loadings at Yanbu.

The restart gives Saudi Arabia another route for exports while shipping through the Strait of Hormuz remains disrupted. Saudi Arabia has also offered additional crude to Asian refiners from loading points outside the strait.

Iraq is adding to the improved supply picture. The country is exporting more than 3 million barrels a day and expects flows through Turkey to rise above 600,000 barrels a day.

Iran has separately indicated that Hormuz could reopen within seven days if the U.S. eases military pressure and lifts its blockade on Iranian ports. Any restoration of traffic through the waterway would further improve the availability of Gulf crude.

Diesel market moves in the opposite direction

While crude supply concerns are easing, refined fuels remain tight. The premium for European low-sulphur gasoil over Brent climbed to a record of about $95 a barrel.

The move followed U.S. President Donald Trump expressing support for a possible restriction on U.S. diesel exports as domestic fuel prices remain elevated. Europe has become particularly dependent on U.S. diesel and jet-fuel imports after the Middle East conflict disrupted regional supplies.

A U.S. export restriction could therefore tighten international fuel availability even if crude supplies continue to recover.

U.S. inventories are providing another bearish signal for crude. Industry data showed stocks increased by 1.8 million barrels in the week through Sept. 18, contrary to expectations for a decline.

Crude and fuel markets are diverging

The latest moves underline an unusual split in energy markets. Additional Saudi and Iraqi supply, together with the possibility of renewed Hormuz traffic, is reducing the geopolitical premium embedded in crude prices.

Diesel remains a different story. A record gasoil premium of roughly $95 a barrel shows that sufficient crude availability does not automatically translate into adequate supplies of refined products.

For oil prices, the next direction will depend increasingly on how quickly Saudi export routes normalize and whether diplomatic efforts translate into greater Gulf shipping. For consumers and refiners, however, the tighter diesel market remains the more immediate pressure point.

Earlier, we reported that U.S.-Iran talks revive hopes for a deal to end the war.

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