Summary
Global oil benchmarks drifted downward after reports that Saudi Arabia restarted flows on a key pipeline to the Red Sea and as meetings between US and Iranian delegations in New York prompted traders to price in a possible diplomatic path to end the conflict. Additional downward pressure came from industry data showing US crude inventories rose unexpectedly.
Oil markets weakened on Wednesday as traders reacted to signs of recovering supply from the Arabian Gulf and to signs of diplomatic engagement between US and Iranian representatives in New York.
Brent crude futures fell 7 cents, or 0.07%, to $99.18 a barrel as of 0119 GMT, while West Texas Intermediate futures declined 35 cents, or 0.39%, to $90.17 per barrel. The retreat followed a session in which Brent closed below $100 a barrel on Tuesday for the first time since September 8.
US President Donald Trump, while warning that he could "annihilate" Iran, also said his envoys Steve Witkoff and Jared Kushner had held "productive talks with mediators of Iran to end the war." Trump added: "I think there’s a lot of momentum for them to make a deal." Traders said the combination of resumed flows and the New York meetings helped dent risk premia that had supported prices in recent weeks.
"The market is currently feeling more constructive about the global oil supply picture than it was a few weeks ago," said Tim Waterer, chief analyst at KCM Trade. He added that "the meeting of US and Iranian delegations in New York has given traders a glimmer of hope ... Despite the continued tough rhetoric, including threats of ‘annihilation,’ the market is choosing to price in the possibility of talks."
On the supply side, Saudi Arabia restarted operations on its East-West Pipeline to the Red Sea, three sources briefed on the matter said. The pipeline had been shut on September 11 after drone attacks, which Saudi Arabia has blamed on Iraqi militia, forced the kingdom to halt crude loadings at its Yanbu port. Since the US-Israeli war on Iran disrupted oil flows through the Strait of Hormuz, Riyadh has used the pipeline to reroute around 4 million barrels per day - around 4% of global supply - to Yanbu.
Meanwhile, Iraq reported rising export volumes. Its oil minister, Basim Mohammed, said on Tuesday the country is exporting more than 3 million barrels per day and expects to increase exports via Turkey to more than 600,000 barrels per day. Provisional shiptracking data from Vortexa and Kpler put Iraqi crude exports in August at 2.3 million and 2.17 million barrels per day, respectively. Those figures are higher than July's levels but remain below February's pre-war shipments of 3.7 million and 3.362 million barrels per day.
Industry reporting added another headwind for prices. Data showed US crude inventories climbed by 1.8 million barrels in the week to September 18, a surprise to analysts polled by Reuters who had expected a draw. Market participants awaited official weekly inventory figures from the US Energy Information Administration, due at 10:30 a.m. ET (1430 GMT), for confirmation.
Price movements reflected the interplay of improving physical flows from the Gulf, indications of diplomatic engagement, and short-term US inventory dynamics. Traders and analysts cited the resumed East-West pipeline operations and the New York meetings as reasons the market was reassessing previous supply concerns, while the unexpected US stock build provided an immediate technical pull on futures.
Key details
- Brent crude futures were at $99.18 a barrel, down 7 cents (0.07%) as of 0119 GMT.
- West Texas Intermediate futures were at $90.17 a barrel, down 35 cents (0.39%).
- Saudi Arabia restarted flows on its East-West Pipeline to the Red Sea, previously closed after drone attacks blamed on Iraqi militia forced loadings at Yanbu to stop on September 11.
- Iraq is exporting more than 3 million barrels per day and plans to ramp up exports via Turkey to over 600,000 barrels per day, according to Oil Minister Basim Mohammed.
- Provisional tracking firms Vortexa and Kpler estimated Iraqi August exports at 2.3 million and 2.17 million barrels per day, up from July but below February levels of 3.7 million and 3.362 million barrels per day.
- Industry data showed US crude inventories rose by 1.8 million barrels in the week to September 18; the EIA's official weekly figures are scheduled for release at 10:30 a.m. ET (1430 GMT).
Market implications
The combination of restored Gulf flows and the prospect of diplomatic engagement has led markets to reduce some of the risk premium that had propped up prices. Short-term US stock data added downward pressure on futures. Sectors most directly affected include energy producers and refiners, transport companies dependent on fuel costs, and markets tied to commodity-sensitive sovereign revenues.
Conclusion
Oil benchmarks eased as physical supply from the Arabian Gulf showed signs of recovery and as diplomatic engagement between US and Iranian delegations in New York offered a pathway, however tentative, to de-escalation. The near-term price trajectory will be influenced by confirmed pipeline throughput, official US inventory data, and any follow-up developments from the New York meetings.