Because of concerns that the US could restrict diesel exports, however, diesel prices moved sharply higher. Oil prices remained close to their lowest level in more than two weeks on Wednesday, as the market focused on improving crude supplies from the Gulf region.
Brent crude futures were up $1.15, or 1.16%, at $100.40 a barrel by 11:43 GMT. US West Texas Intermediate (WTI) crude futures rose 35 cents, or 0.42%, to $90.90 a barrel, according to Reuters. Brent had fallen to $97.36 a barrel in the previous session, its lowest level since September 8. WTI also touched its lowest level since September 1 earlier on Wednesday. Europe’s low-sulphur gasoil premium over Brent crude futures climbed to a record of about $95 a barrel. The pipeline had been shut on September 11 after drone attacks that Saudi Arabia blamed on an Iraqi militia. Iraq’s oil minister said on Tuesday that the country is currently exporting more than 3 million barrels per day. The country expects flows through the Turkish route to rise to more than 600,000 barrels per day, according to the Iraqi oil minister. Industry data showed that US crude stocks increased by 1.8 million barrels in the week ending September 18. The US Energy Information Administration is scheduled to release its weekly crude inventory figures at 10:30 am ET.
Despite Wednesday’s gains, crude prices remain under pressure. The biggest move in the energy market was seen in diesel. The diesel surge came after US President Donald Trump backed the idea of banning US diesel exports. A US diesel export ban could have a major impact on Europe. European countries have become heavily dependent on diesel and jet fuel imports from the US after the US-Israeli war on Iran disrupted supplies from the Middle East. The possibility of a US export ban has pushed diesel prices higher even while crude prices are under pressure. Analysts and market watchers have warned that restricting diesel exports may not solve the price problem. They say such a move could do little to bring down high energy prices and could instead create more supply problems and economic disruption around the world. Markets are also watching hopes for diplomatic talks that could help end the fighting in the Middle East. Trump sent mixed signals on the Iran conflict. For oil traders, one of the most important developments is the reopening of Saudi Arabia’s East-West pipeline. The pipeline shutdown had disrupted Saudi crude exports. The closure stopped crude loadings at Yanbu port, making the reopening important for restoring oil flows. Saudi Arabia is also offering more oil to Asian refiners from locations outside the Strait of Hormuz. This could give buyers more options if shipping through the key oil route remains disrupted. Iraq is also increasing its oil exports. Iraq expects exports through Turkey to increase further. Iran has also indicated that the Strait of Hormuz could reopen. A reopening of the Strait of Hormuz would be important for global oil supplies. The waterway is a major route for oil shipments, so any improvement in its availability could ease concerns about supply shortages. US crude inventories are also adding pressure to oil prices. The inventory increase was unexpected. Analysts polled by Reuters had expected US crude inventories to decline, so the rise added another bearish signal for the oil market. Markets are now waiting for the official US inventory data.
Because of a global shortage, trump has supported the proposal as a way to bring down diesel prices, which have reached record highs. Because more oil is becoming available from the Gulf region, crude prices have been falling this week mainly. Because of a global supply shortage and fears that Trump’s proposed US diesel export restrictions could further disrupt the market, crude prices are being pressured by improving oil supply and hopes of easing Middle East tensions, while diesel prices are surging.
“Brent is being underpinned by surging gasoil prices amid renewed worries the US may introduce a diesel export ban,” said Ole Hansen, head of commodity strategy at Saxo Bank. On Tuesday, he warned that he could “annihilate” Iran, but he also said his envoys had held productive talks with mediators working to end the war. Hansen said the reopening of the pipeline was the key news supporting lower oil prices. A senior Iranian official told Reuters that the strategic waterway could reopen within seven days if the US reduces military pressure and lifts its blockade on Iranian ports.
Saudi Arabia resumed operations on its East-West Pipeline to the Red Sea on Tuesday, according to three sources briefed on the matter.
