Oil prices rose on Wednesday as traders weighed two opposite developments: Saudi Arabia is restoring some crude exports, which could ease supply concerns, while uncertainty over the Strait of Hormuz continues to support oil prices.
Brent crude futures for November delivery rose 1% to $103.64 a barrel at 05:06 ET. US West Texas Intermediate (WTI) crude futures also gained 0.9% to $90.21 a barrel. Brent crude had settled 2.6% lower on Tuesday, while WTI dropped 3.5%. Shipping data showed that nearly 10 million barrels of crude were being loaded at Yanbu and the nearby Al Muajjiz terminal, according to Reuters. Saudi Arabia has also restored flows through the East-West Pipeline to at least 3.5 million barrels per day. US diesel prices reached $6.53 per gallon last week, according to the Financial Times. That diesel price was more than 70% above its pre-war level, according to the Financial Times.
That is around half of the pipeline’s total capacity, Bloomberg reported, citing people familiar with the matter. The Financial Times reported that the administration is considering several measures to reduce higher domestic fuel prices, including a possible diesel export ban. The rise came after a sharp fall in the previous session. Saudi Arabia has restarted crude loadings at the Red Sea port of Yanbu after restoring flows through its East-West Pipeline. This gives the country another route to export oil without using the Strait of Hormuz. Saudi Aramco has already informed customers about its October crude loading schedule. The East-West Pipeline connects Saudi Arabia’s oil-producing areas in the east with the Red Sea. This allows Saudi Arabia to move and export crude while bypassing the Strait of Hormuz. However, the Strait of Hormuz remains a major risk for the oil market. The waterway has been effectively closed since shortly after the US and Israel began their joint assault on Iran in late February. Diplomatic efforts to reopen the Strait of Hormuz have so far failed to produce an agreement. Diplomatic talks over the Strait are still continuing. Qatar is mediating between Washington and Tehran as the two sides discuss a possible agreement involving the reopening of the waterway and easing some US pressure on Iran. The talks have not yet produced a breakthrough. US President Donald Trump has rejected reports that Washington offered sanctions relief to Tehran, while Iran continues to seek conditions linked to reopening the Strait of Hormuz. Trump is also reportedly considering restrictions on diesel exports as US fuel prices remain high. The possible diesel export restrictions come as high energy prices put pressure on US consumers and businesses. For oil markets, the key question remains how long the Hormuz disruption will last. uncertainty over the Strait of Hormuz continues to influence crude prices While Saudi Arabia is restoring exports through an alternative route. That is why Brent crude is rising again despite improving Saudi oil flows. Traders are balancing the additional Saudi supply against the risk that disruptions through the Strait of Hormuz could continue and affect global oil shipments.
Deutsche Bank analysts said traders are still pricing in the possibility of a longer disruption. The analysts said increased oil flows from the Gulf have eased immediate supply pressure, but the market continues to prepare for the disruption to last longer. One reason oil prices fell on Tuesday was improving Saudi Arabian export flows. The return of these alternative export routes has reduced some immediate fears about oil supply shortages and helped push crude prices lower on Tuesday.
