Crude settling at session lows after a sell-off through the US session suggests near-term momentum favours supply relief, although a double-digit monthly gain for Brent shows the war risk premium is still firmly in the price. One trading executive noted that the more oil flows out of the Middle East, the less bargaining power Iran holds in talks with the US, a framing that ties the physical recovery directly to the diplomatic track. Diesel is drawing the most policy attention, with US futures firmer even as European futures edged lower, and any regulatory relief or emergency stock releases could keep pressure on the diesel complex. The risk for bulls is that additional policy supply arrives while exports normalise, and the risk for bears is a stalling of the recovery or a breakdown in diplomacy.
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Crude slid to session lows as recovering Middle East exports, a US reserve offer and a Russia sanctions report outweighed Iran war risk, though Brent still faces a large September gain.
Summary:
- Brent settled down circa 2.5% at around $103 a barrel and WTI fell circa 3.5% to around $89 on Tuesday, both closing at session lows after selling off through the US session.
- Saudi Arabia resumed tanker loadings at Yanbu after restarting the East-West Pipeline, and Middle East crude exports in September rebounded to around 16 million barrels per day, the highest since the US-Israeli war on Iran began in late February.
- The US Department of Energy offered up to 40 million barrels from the Strategic Petroleum Reserve, though a similar June offer drew commitments to borrow only around 500,000 barrels.
- Qatar said mediation between the US and Iran is continuing, while Trump denied offering Iran anything to end the war.
- The Atlantic reported that Trump backs Russia sanctions relief tied to a prisoner release, which could open the way for US deals involving Russian oil, diesel and other commodities.
- The White House has urged the EU to draw down diesel emergency stocks and is weighing broader sales of red-dyed diesel as an alternative to a diesel export ban.
Oil prices fell on Tuesday and settled at session lows as signs of recovering Middle East exports and a run of US supply-related headlines outweighed lingering concern about disruption from the US-Israeli war on Iran. Brent futures closed down circa 2.5% at around $103 a barrel, while US West Texas Intermediate fell circa 3.5% to around $89. Both benchmarks sold off through the US session from earlier highs in the European morning, although Brent remains on course for a monthly gain in double digits and WTI for a gain of circa 4%.
The physical picture improved during the day. Saudi Arabia resumed tanker loadings from its Red Sea port of Yanbu after restarting operations on the East-West Pipeline, according to trade sources and shipping data. Kpler data released on Monday showed crude exports from Middle East producers rebounding in September to around 16 million barrels per day, the highest level since the war began in late February.
Diplomacy also played a part in the early softening. Qatar said its mediation efforts are ongoing and aimed at building common ground between the US and Iran, which suggested that talks remain possible. Trump, however, said he has offered Iran nothing to end the war, rejecting media reports that cited US officials saying he was willing to ease sanctions and release frozen funds in return for concrete steps on Iran’s nuclear programme.
Further downside pressure came from the US. The Atlantic reported that Trump backs sanctions relief for Russia in exchange for a prisoner release, and that the move would create a path for the US to sign lucrative deals involving Russian oil, diesel, rare earth minerals and other commodities. Separately, the US Department of Energy offered up to 40 million barrels from the Strategic Petroleum Reserve. In June, the administration offered to loan the last 40 million barrels from an International Energy Agency agreement, but later said companies had agreed to borrow only around 500,000 barrels.
Diesel remained a focus. The White House has urged the European Union to draw down diesel emergency inventories to lower global prices, and the administration said several EU members have not released as much from reserves as they promised. Trump is also considering regulatory relief that would allow broader sales of red-dyed diesel, which could let some buyers avoid the federal fuel tax, according to two people familiar with the discussions. That proposal has emerged as a leading alternative to a diesel export ban. US diesel futures traded circa 2.5% higher, while European diesel futures edged lower.
Traders will now watch whether Middle East exports continue to recover, whether the SPR offer draws real take-up, and whether talks between Washington and Tehran make progress.
This article was written by Eamonn Sheridan at investinglive.com.