Crude oil prices jumped nearly 3% on Thursday, with Brent crude touching $106 a barrel. The surge came amid growing uncertainty over US-Iran negotiations, particularly over the future of oil supplies from the Middle East. The gains came after Iranian President Masoud Pezeshkian told the United Nations General Assembly that Tehran would not bow to US threats and would not give up its right to develop nuclear technology for economic development.
Pezeshkian also said Iran would not allow freedom of navigation through the Strait of Hormuz as long as US sanctions and a naval blockade remain in place. The Strait is a key route for global oil trade and carried about 20% of global crude and refined products before the conflict. Tehran is reviewing a US response to its proposal to end hostilities, though significant differences remain, a senior Iranian official told Reuters. The official said reopening the Strait of Hormuz and lifting Washington’s naval blockade of Iran were discussed during indirect talks on Tuesday.
US measures voluntary diesel export cuts
In the US, Energy Secretary Chris Wright said the Trump administration was working with refiners on a voluntary reduction in US diesel exports instead of imposing a formal ban on overseas shipments. Wright had said earlier on Wednesday that a diesel export ban would not work. Analysts and market watchers have warned that such a move could do little to ease high energy prices while potentially worsening global fuel supplies and adding to economic disruption. US crude inventories also rose unexpectedly last week. Inventories increased by 3 million barrels to 426.4 million barrels in the week ended September 18, according to the Energy Information Administration. Analysts polled by Reuters had expected a 641,000-barrel draw. Fuel inventories declined.
Middle East supplies remain below pre-war levels
Saudi Arabia has resumed operations on its East-West oil pipeline to the Red Sea, according to three sources briefed on the matter. The pipeline had been shut after drone attacks that Saudi Arabia blamed on an Iraqi militia, disrupting crude loadings at Yanbu port. Iraq is exporting more than 3 million barrels per day and expects to raise exports through Turkey to more than 600,000 barrels per day, its oil minister said on Tuesday to Reuters.
Asia’s crude imports are also recovering but remain below pre-conflict levels. Kpler data showed Asian crude imports are expected to reach 23.96 million barrels per day in September, up from 23.38 million bpd in August but about 13% below the average for the three months before the conflict. Refined fuel supplies remain tight. Asian imports of light and middle distillates are forecast at 5.84 million bpd in September, up from 5.25 million bpd in August but more than 1 million bpd below pre-conflict levels.