Oil Prices Reverse Course as Traders Watch US-Iran Diplomacy

Crude oil prices, which had been declining since the previous week, experienced a reversal and posted gains ahead of a UN General Assembly session. Many believe that the talks between the U.S. and Iran could lead to progress, yet not all share this optimism. At the time of this report, Brent crude was trading at 101.69 per barrel and West Texas Intermediate stood at $93.38 per barrel.

However, some analysts perceive the change in oil prices differently. KCM Trade chief market analyst Tim Waterer stated that the rise in WTI and the stronger opening in Brent suggest a short-covering bounce following the recent decline instead of a fundamental shift in the market. He added that traders who were positioned for further downside are taking profits off while the diplomatic narrative unfolds.

On the other hand, ING commodity analysts reported that oil traders are generally bullish. According to their note from Monday, speculative market players had increased their long positions on Brent by 16,904 in the week to September 15, reaching a total of 282,657, the highest since May of this year. The analysts attributed the increase to short covering as investors continue to price in greater upside risk from Middle East supply disruptions.

Meanwhile, the foreign ministers of the G7 group called on Iran to cease arming the Yemeni Houthis, who have recently intensified attacks on Saudi energy and civil infrastructure. "We condemn in the strongest terms the unacceptable continued strikes carried out by the Houthis in Yemen and against the Kingdom of Saudi Arabia," the officials said in a statement.

"We call on the Houthis to immediately cease all military actions, all threats, and attacks against civilian shipping, and to return to the political process in good faith."