Oil prices rise before potential US-Iran talks
Oil prices posted gains on Tuesday for the first time in five sessions. Supply flows via the Strait of Hormuz increased over the weekend. Markets await developments on potential US-Iran talks at the United Nations General Assembly this week.
Brent crude futures for November delivery rose $1.72, or 1.7%, to $102.06 per barrel at 09:17 Turkish time (06:17 GMT).
WTI crude futures for October delivery, set to expire on Tuesday, climbed $1.62, or 1.7%, to $97.40 per barrel. The more actively traded November contract rose $1.28, or 1.4%, to trade at $93.65 per barrel.
Tehran and Washington exchanged threats on Sunday; however, Trump expressed openness to meeting Iranian President Masoud Pezeshkian, who is expected to be in New York this week for the UN meeting.
The rise in WTI and the strong opening for Brent appear to be a typical short-covering reaction following recent declines, rather than a fundamental shift. Investors who positioned themselves for further price drops are reducing risk as the diplomatic process unfolds.
Over the weekend, Iran conveyed its conditions for resuming negotiations to mediators.
Oil prices are likely to remain range-bound and sensitive to the news flow until there is clear progress or a setback in diplomatic efforts between the US and Iran. Tensions in the Middle East remained high after the Iran-backed Houthis in Yemen announced attacks on Riyadh and a Saudi Aramco facility in Yanbu, and intensified their efforts to sever the link between Saudi-backed forces and the Red Sea coast.
Following a recent surge in the group's military operations and a subsequent appeal by Saudi Arabia to Beijing, China privately requested that Tehran help rein in the Houthi attacks.
Saudi Arabia's oil exports via the Strait of Hormuz increased over the weekend. Saudi Aramco ramped up exports through the Strait of Hormuz after attacks on the East-West Pipeline forced a halt to some shipments via Yanbu. Tanker tracking data showed that approximately 14 million barrels of crude oil were loaded onto seven supertankers in the Gulf region on Sunday.
Supply concerns are easing as shipments reach a six-month high and Saudi Arabia works to bring the East-West pipeline back online.
Although implied volatility for crude oil fell 3.3% to 50.39, it remains at historically high levels.
Meanwhile, Libya's National Oil Corporation announced that an armed group shut a valve on the pipeline running from the Sharara crude oil field to Zawiya Port on Monday, resulting in a significant drop in production at the Sharara field. Production fell by approximately 200,000 barrels per day and currently stands between 100,000 and 105,000 barrels per day.
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