Oil Prices Climb $1 as US-Iran Talks Stall and Fuel Markets Tighten
Oil Market Overview and Key Drivers
By Laila Kearney
NEW YORK, Sept 30 (Reuters) - Oil prices rose by about $1 a barrel on Wednesday, and logged steep monthly gains, on stalled US-Iran peace talks and tightening US fuel markets.
Oil Price Movements and Monthly Gains
The Brent November futures contract, which expires on Wednesday, settled up 91 cents, or 0.9%, at $103.50 a barrel. The more active December contract was up $1.87, or 1.9%, at $98.03. US West Texas Intermediate crude settled at $90.42, up $1.04, or 1.2%.
Brent recorded a monthly gain of around 14%, its biggest since July, while WTI increased by about 5% on the month.
Geopolitical Developments Impacting Oil Prices
Qatar said on Tuesday it hopes that shuttle diplomacy between Tehran and Washington can lead to a breakthrough.
However, US President Donald Trump denied reports by Axios and CNN that cited US officials as saying he was willing to give Iran sanctions relief and release frozen Iranian funds in return for "concrete" steps by Tehran on its nuclear programme.
Supply Factors and OPEC+ Actions
On Tuesday, Saudi Arabia resumed oil tanker loadings from its Red Sea port of Yanbu after restarting operations on its East-West Pipeline.
Goldman Sachs estimates Gulf oil exports have recovered to 23.3 million barrels per day over the last week, in line with their 2025 average, as exports doubled in September, it said in a note on Tuesday.
Over the past five days, the 10-day average for total oil exports has held at 20.5 million bpd, or 89% of 2025 levels, JPMorgan estimated.
OPEC+ Production Targets
OPEC+ oil-producing countries are likely to keep their oil production targets steady for November when they meet on Sunday, two people with knowledge of the matter told Reuters.
"Recovering crude flows should temper supply-driven price pressures, although persistent product shortages and elevated freight costs are likely to keep the broader energy market tight," analysts at Japanese bank MUFG said.
US and Global Fuel Inventories
White House and EU Diesel Inventories
The White House has urged the European Union to draw down emergency diesel inventories in an effort to lower global prices, according to two people familiar with the effort.
Shrinking US Fuel Inventories
Shrinking US fuel inventories supported oil prices, even as crude stocks grew.
"Lower refining activity ushered in draws for both distillates and gasoline," said Matt Smith, an analyst at Kpler. "Refining activity should gradually climb going forward, helping to protect product inventories from dropping to further lowly levels."
US Inventory Data
US gasoline inventories fell by 1.7 million barrels to 204.4 million barrels last week, while distillate stockpiles — including diesel and heating oil — dropped by 2.3 million barrels to 105.2 million barrels, Energy Information Administration data showed on Wednesday.
"There's a call for distillates around the world and you have no choice but to pay the price," said John Kilduff, partner at Again Capital in New York.
US crude inventories, meanwhile, rose by 922,000 barrels to 427.3 million barrels in the week ended September 25, the EIA said, compared with analysts' expectations in a Reuters poll for a 264,000-barrel draw.
Market Reactions and Policy Considerations
Crude Oil Benchmark Spread and Export Policies
The spread between the two crude oil benchmarks also stretched to its widest in four months as traders monitored potential plans by the US to restrict diesel exports, which could create an oversupply in the US market and lead refiners there to process less crude.
Trump is considering allowing sales of red-dyed diesel, instead of an export ban, to offer some price relief to consumers ahead of the November midterm elections.
US Economic Data and Oil Prices
US economic data also supported oil prices, with Commerce Department data showing inflation increased less than expected in August, likely reducing the urgency for the Federal Reserve to raise interest rates again in October.
(Additional reporting by Enes Tunagur in London, Mohi Narayan in New Delhi and Helen Clark in Perth and Arathy Somesakhar in Houston; Editing by Philippa Fletcher, Kirsten Donovan, Elaine Hardcastle and David Gregorio)