Key facts
- Oil prices rose on Wednesday, with Brent and US WTI futures on track for significant monthly gains.
- Stalled US-Iran diplomacy and tightening US fuel markets are contributing factors.
- Brent November futures were up 1% at $103.71 a barrel, while the December contract rose 2.8% to $98.81.
- US West Texas Intermediate crude was up 2.2% at $91.98.
- Brent is headed for a monthly gain of around 14%, its largest since July.
- US gasoline inventories fell by 1.7 million barrels last week.
Oil prices saw an increase on Wednesday, with both Brent and US West Texas Intermediate (WTI) futures on track for significant monthly gains. This rise is attributed to stalled diplomatic progress between the United States and Iran, as well as tightening fuel markets within the US.
The Brent November futures contract, set to expire on Wednesday, was up $1.12, or 1%, at $103.71 a barrel. The more actively traded December contract saw a larger increase of $2.65, or 2.8%, reaching $98.81. US WTI crude futures climbed $1.98, or 2.2%, to $91.98.
Brent crude is expected to achieve a monthly gain of approximately 14%, marking its largest increase since July. WTI is on track for a roughly 5.5% rise for the month. Qatar expressed hope for a diplomatic breakthrough between Tehran and Washington. However, US President Donald Trump denied reports suggesting he was open to providing Iran with sanctions relief and releasing frozen funds in exchange for concrete steps on its nuclear program.
In terms of supply, Saudi Arabia has resumed oil tanker loadings from its Red Sea port of Yanbu after restarting operations on its East-West Pipeline. Goldman Sachs estimates that Gulf oil exports have recovered to 23.3 million barrels per day over the past week, doubling in September. JPMorgan estimated that total oil exports over the past five days averaged 20.5 million bpd.
OPEC+ countries are anticipated to maintain their current oil production targets for November when they convene on Sunday. Analysts at MUFG noted that while recovering crude flows might ease supply-driven price pressures, persistent product shortages and high freight costs are likely to keep the broader energy market tight.
Shrinking US fuel inventories provided support for oil prices, despite an increase in crude stocks. US gasoline inventories decreased by 1.7 million barrels to 204.4 million barrels last week, and distillate stockpiles, including diesel and heating oil, fell by 2.3 million barrels to 105.2 million barrels, according to data from the Energy Information Administration (EIA). Conversely, US crude inventories grew by 922,000 barrels to 427.3 million barrels in the week ending September 25, contrary to analysts' expectations of a draw.
The spread between Brent and WTI widened to its broadest in four months, influenced by potential US restrictions on diesel exports, which could lead to an oversupply in the US market and reduced crude processing by refiners. President Trump is reportedly considering allowing sales of red-dyed diesel as a means of price relief for consumers ahead of the November midterm elections, rather than an outright export ban.