Oil extends gains as U.S.-Iran stalemate overshadows Saudi flows

Oil prices continued to rise on Tuesday, building on gains from the previous day as tensions between the U.S. and Iran prevented any optimism about Middle East supply disruptions, according to market data. By 02:51 ET (06:51 GMT), Brent Oil Futures for November delivery had climbed 1.5% to $106.90 per barrel, while West Texas Intermediate (WTI) crude futures increased 1.3% to $93.80 per barrel. Brent had earlier reached near $109 a barrel in the prior session, but later settled closer to $105 a barrel.

Efforts by Qatar to mediate between Iranian Foreign Minister Abbas Araqchi and U.S. officials fell short of reaching a deal before the U.S. midterm elections, as reported by Reuters. The ongoing diplomatic uncertainty has overshadowed signs of recovering physical oil flows. September crude exports from key Middle Eastern producers surged to 12.8 million barrels per day, the highest level since February, as per preliminary Kpler data.

Saudi Arabia and the United Arab Emirates played a significant role in this increase. Saudi crude exports through the Strait of Hormuz were set to rise sharply this month after Saudi Arabia repaired its East-West pipeline and resumed shipping from Yanbu port, which bypasses Hormuz. This pipeline can handle up to 7 million barrels per day, with around 3.5 million barrels per day already flowing post-restart, as per the Wall Street Journal.

Despite the higher exports, market concerns remain due to the costly and challenging nature of transporting crude around the Gulf. The disruption has also pressured refined product markets, leading the White House to explore regulatory changes that could allow for broader sales of red-dyed diesel. Additionally, speculation over potential U.S. diesel export restrictions has widened the gap between Brent and WTI crude prices.