Oil prices continued to decline on Wednesday, driven by investor expectations of improved crude supplies from the Gulf region and growing hopes for a diplomatic resolution to the US-Iran conflict. Brent crude futures dropped 1.09 dollars, or 1.1%, to 98.16 dollars per barrel, while US West Texas Intermediate futures fell 1.50 dollars, or 1.67%, to 89.01 dollars per barrel. Both contracts have lost value for six consecutive sessions, trading near their lowest levels in nearly two weeks.
The decline in oil prices comes as US President Donald Trump stated that his envoys, Steve Wittkoff and Jared Kushner, held productive talks with Iranian intermediaries aimed at ending the war. Trump expressed optimism about reaching an agreement, saying, "I think there's tremendous momentum for a deal." This development has contributed to a more positive outlook on the global oil supply situation.
The resumption of operations on Saudi Arabia's East-West Pipeline, which was closed following drone attacks on September 11, has also contributed to the decline in oil prices. The pipeline, which transports oil to the Red Sea, was restarted on Tuesday, according to sources familiar with the matter. This move is expected to increase oil flows from the Middle East region.
Saudi Arabia also offered additional oil quantities to Asian refineries, to be loaded from locations outside the Strait of Hormuz. This development has eased concerns about potential supply disruptions in the region. Furthermore, Iraq's oil exports are expected to increase, with the country's oil minister, Bassem Mohammed, stating that Iraq currently exports over 3 million barrels per day and aims to boost exports through Turkey to over 600,000 barrels per day.
Data from shipping tracking companies, Vortexa and Kpler, showed that Iraq's crude oil exports reached approximately 2.3 million barrels per day and 2.17 million barrels per day in August, respectively. These numbers represent an increase from July but remain below pre-war levels in February. The rise in Iraqi oil exports has added to the downward pressure on oil prices.
Additionally, industry data revealed that US crude inventories increased by about 1.8 million barrels in the week ending September 18, defying analyst expectations of a decline. The official weekly US oil inventory data from the Energy Information Administration is set to be released later on Wednesday. This increase in inventories has contributed to the decline in oil prices.
The ongoing US-Iran conflict and its impact on global oil supplies remain a key concern for investors. While Trump's comments on potential diplomatic efforts have raised hopes for a resolution, the situation remains uncertain. The decline in oil prices reflects the market's expectation of improved supplies and a potential easing of tensions in the region.
Key points
- Oil prices declined for the sixth consecutive session amid improved supplies from the Gulf region and growing hopes for US-Iran talks.
- The resumption of Saudi Arabia's East-West Pipeline and increased Iraqi oil exports have contributed to the decline in oil prices.
- Industry data showing an increase in US crude inventories has added to the downward pressure on oil prices.
