Oil prices held near a two-week low on Wednesday as improving Gulf crude supplies weighed on the market. European diesel refining margins hit a record high on the threat of a US export ban, while Saudi Arabia's pipeline restart and rising Iraqi exports pointed to looser supply ahead.
Oil prices held near their lowest level in more than two weeks on Wednesday, pressured by improving crude supplies from the Gulf even as diesel refining margins in Europe hit a record high.
Brent crude futures rose 37 cents, or 0.37%, to $99.62 a barrel by 0958 GMT, while West Texas Intermediate futures lost 44 cents, or 0.49%, to $90.08. Brent had touched its lowest since September 8 in the previous session at $97.36, and WTI hit its lowest since September 1 earlier Wednesday.
Diesel margins spike on export-ban threat
European low-sulphur gasoil's premium to Brent crude hit a record of about $95 a barrel after President Donald Trump said he backed a diesel export ban to lower prices that have reached record highs amid a global supply shortage. Europe has leaned heavily on US diesel and jet fuel imports since the US-Israeli war on Iran disrupted Middle East supplies.
According to Saxo Bank's head of commodity strategy Ole Hansen, surging gasoil prices are underpinning Brent amid renewed worries the US could introduce an export ban. But analysts and market watchers have warned such a measure would do little to ease high energy prices and could worsen supply and economic disruptions around the globe.
Gulf supply eases pressure
Oil has come under pressure this week on rising Gulf supplies and hopes for diplomatic talks to halt hostilities in the Middle East. Trump also said Tuesday that his envoys had held productive talks with mediators of Iran to end the war.
Hansen said the reopening of the East-West Saudi pipeline is the most important news for the market from a lower price point. Saudi Arabia resumed operations on the pipeline to the Red Sea on Tuesday, according to three sources briefed on the matter, after drone attacks it blamed on Iraqi militia forced a shutdown on September 11 that halted crude loadings at Yanbu port. Saudi Arabia also offered more barrels to Asian refiners for lifting from locations outside the Strait of Hormuz.
Iraq is raising exports too, its oil minister said Tuesday: the country is now exporting more than 3 million barrels per day and expects to boost exports via Turkey to more than 600,000 barrels per day. A senior Iranian official told Reuters the Strait of Hormuz could reopen within seven days if the United States eases military pressure and lifts its blockade on Iranian ports.
Inventories complicate the outlook
US crude inventories rose by 1.8 million barrels in the week to September 18, industry data showed, analysts polled by Reuters had expected a decline. Official weekly figures from the US Energy Information Administration are due at 10:30 a.m. ET.
Source: Reuters via Investing.com
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