Oil up 1% as Iran official says country will keep enriched nuclear material
Both oil benchmarks closed higher for the day
Oil prices climbed around 1 percent on Wednesday (Nov 11) as Iran's security chief assured the country would not permit any enriched nuclear material to leave Iran. The news sparked concerns about potential supply shortages, pushing prices away from two-month lows seen the day prior. Brent futures closed at US$92.76, a 1.39 percent increase, while US West Texas Intermediate crude rose 49 cents, or 0.57 percent, to US$86.53.
The previous day, oil prices dipped by over US$3 per barrel after US officials downplayed the necessity for further military strikes against Iran. However, prices rebounded after the Iranian official's comments, with UBS analyst Giovanni Staunovo noting that oil prices are being buoyed by fading hopes of an imminent de-escalation.
OPEC+ crude oil production saw a surge in October, driven by a substantial rise in output from Saudi Arabia. Despite some optimism regarding diplomatic developments, there is no clear indication that disruptions in the Strait of Hormuz will abate. Simon-Peter Massabni, head of business development at XS.com, stated that operational risks have not vanished simply because diplomatic signals have softened. "More critically, even if a political agreement is reached, shipping activity is unlikely to swiftly revert to normal."
Iranian forces have targeted ship navigation systems in the Omani island of Didamar, showcasing Iran's potential to disrupt infrastructure aimed at restoring Gulf oil flows. LSEG Oil Research noted in a November 10 note that even if a deal is reached, an uptick in flows through the waterway would hinge on mine clearance, insurance costs, and the willingness of shipowners to take on the risk.
US crude inventories saw an increase of 9 million barrels in the most recent week, according to data from the American Petroleum Institute. Official figures are slated for release on Thursday, delayed by a day due to the US Veterans Day holiday on Wednesday. Kpler data reveals that Middle East crude and condensate outages have dwindled to approximately 3.8 million barrels per day, with Saudi and Iraqi crude output returning to pre-war levels and outages in both nations significantly reduced.
Additionally, Russian and Ukrainian negotiators reported some progress in two days of peace talks in Abu Dhabi that concluded on Wednesday. However, US mediators expressed reservations, citing a lack of trust between the warring parties and persistent disagreements on major issues, including territorial matters. Raymond James analyst Pavel Molchanov remarked that the Russia-Ukraine conflict has been ongoing for almost five years, and past diplomatic efforts have yielded little tangible results.
Despite these developments, Ukraine's military reported that its drones struck Russia's primary Baltic port of Ust-Luga, causing a fire and damaging part of its network of tanks. Russian oil refining capacity has been diminished by roughly 30 percent since late October due to renewed Ukrainian drone attacks, according to industry sources.
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