- Oil prices held gains as traders assess Middle East crude flow recovery and tight fuel markets
- Brent crude traded near $98 a barrel after a 1.9% rise in the previous session
- Middle East oil exports are near pre-war levels but fuel supply recovery remains weak
Oil prices held on to their recent gains on October 1, Thursday as traders assessed whether crude flows from the Middle East can sustain a recovery towards pre-war levels, even as fuel markets remain tight. Brent for December delivery traded near $98 a barrel, after rising 1.9% in the previous session. West Texas Intermediate hovered around $90. This comes as crude flows from the Middle East are nearing pre-war levels, but the recovery in fuel supplies has been weaker.
Crude has now risen for a third straight month in September, with markets still waiting for clarity on whether the US and Iran can reach a lasting agreement that would allow the Strait of Hormuz to fully reopen.
US President Donald Trump said at the White House that the US has "total control" of the waterway and that Washington would have an answer for Iran shortly.
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Middle East Oil Flows Near Pre-War Levels
Goldman Sachs estimates that around 23 million barrels a day of oil left the Middle East in the latest week, either through the Strait of Hormuz or alternative export routes such as the Red Sea. That is roughly in line with the region's average exports last year. But determining the exact flow of Gulf supplies remains difficult amid the ongoing conflict. Merchant vessels have come under attack, while Tehran-aligned militants have also targeted Saudi Arabia's East-West pipeline.
The uncertainty has made oil prices particularly sensitive to developments around the war and negotiations. Months of intermittent talks, launched by the US and Israel in February, have repeatedly shifted expectations around the outlook for supply, leaving crude futures vulnerable to sharp swings.
Fuel Shortages Add To Oil Demand
The pressure is not limited to crude supplies. Fuel markets are showing signs of significant shortages, encouraging refiners to process as much crude as possible and supporting demand for oil. US inventory data released by the Energy Information Administration on Wednesday added to those concerns. Distillate stockpiles are at their lowest seasonal level on record, according to the agency, while gasoline inventories in the US Midwest have also fallen to their lowest level ever recorded.
The fuel squeeze has also raised questions over possible changes to US diesel export policy. There has been speculation that the White House could consider an outright ban on diesel exports, although Trump has said he is weighing the potential negative consequences. US Energy Secretary Chris Wright said European countries are expected to announce new diesel supplies that could come into the market soon.
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