Oil Prices Languish Near Two Week Lows as Gulf Supply Outlook Brightens

Oil prices hovered near their lowest levels in more than two weeks on Wednesday as traders weighed expanding Gulf supplies, diplomatic developments involving the United States and Iran, and an unexpected increase in U.S. crude inventories.

Brent crude futures gained 16 cents, or 0.16%, to $99.41 a barrel by 08:09 GMT. West Texas Intermediate futures moved in the opposite direction, falling 50 cents, or 0.55%, to $90.02.

Brent had dropped as low as $97.36 during the previous session, marking its weakest level since September 8. WTI touched its lowest level since September 1 earlier on Wednesday.

The market moves followed comments from U.S. President Donald Trump, who said his representatives had participated in what he described as productive talks involving mediators for Iran. Trump also kept open the possibility of further military action.

WisdomTree commodity strategist Nitesh Shah said developments around the diplomatic discussions had contributed to oil price movements, although he warned that market direction could shift rapidly if circumstances changed.

"Trump is trying to give off strong vibes of good talks … so that's possibly something driving down oil prices," Shah said. "But I'd caution that things could change quite abruptly back into positive price moves."

Supply conditions also improved after Saudi Arabia resumed operations on its East-West Pipeline to the Red Sea on Tuesday, according to sources cited by Reuters. The pipeline had been closed following drone attacks earlier in September.

That shutdown interrupted crude loadings from the port of Yanbu. Saudi Arabia has used the route to redirect about 4 million barrels per day toward the Red Sea following disruptions to Gulf shipments through the Strait of Hormuz.

The redirected volume is equivalent to approximately 4% of global oil supply. Saudi Arabia has also offered additional crude to Asian refiners from locations outside the Strait of Hormuz.

Iraq is raising its oil exports as well. The country’s oil minister said exports were running at more than 3 million barrels per day, while shipments through Turkey were expected to climb above 600,000 barrels per day.

Diplomatic signals from Iran added to expectations that more crude could become available. A senior Iranian official told Reuters that the Strait of Hormuz could reopen within seven days if the United States reduced military pressure and lifted its blockade of Iranian ports.

U.S. inventory figures supplied another bearish factor for crude prices. Industry data showed that crude stocks increased by 1.8 million barrels during the week to September 18, contrary to expectations for a decline among analysts surveyed by Reuters.

Official weekly inventory figures from the U.S. Energy Information Administration were scheduled for release later on Wednesday. The data would provide another measure of supply conditions in the U.S. market.

Despite signs of improving crude availability, refined fuel constraints remained unresolved. Matt Stanley, head of market engagement at Kpler, said tighter conditions persisted for diesel and jet fuel even as additional crude reached the market.

"A bit more crude is finding its way into the market and the East-West pipeline returning is giving everyone some breathing space. But the products problem hasn't gone away. Diesel is tight. Jet fuel is tight. And increasingly it's the end user who is going to start feeling this," Stanley said.

Trump said Tuesday that he supported the idea of restricting U.S. diesel exports as a possible response to record fuel prices. Analysts and market participants cited by Reuters questioned whether such restrictions would reduce prices, with some warning of further disruption across domestic and international fuel markets.