Oil prices extended gains for a second session, with Brent crude holding above $106 a barrel and West Texas Intermediate approaching $94, as uncertainty around US-Iran negotiations outweighed the partial restoration of flows through Saudi Arabia's key East-West pipeline. The market is weighing two competing forces: the prospect of more supply returning through Saudi Arabia and the continued uncertainty around the Strait of Hormuz.
Iranian officials have privately expressed pessimism about reaching a deal with Washington that would end hostilities and reopen the waterway before the US midterm elections in November, according to Bloomberg reports. President Donald Trump has also rejected an Iranian proposal linked to reopening the strait within seven days.
US-Iran talks remain fluid, however. Reuters reported that officials from both sides were separately engaging with mediators in a renewed effort to end the conflict and reopen the Strait of Hormuz.
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Saudi Pipeline Restart Offers Some Relief
Saudi Arabia has restored around half the flows through its East-West pipeline, which bypasses the Strait of Hormuz. Flows to the Red Sea have reached at least 3.5 million barrels a day, according to people familiar with the matter.
The restart provides an alternative route for Saudi crude, but has not eliminated concerns over physical supply availability. Oil markets are also contending with disruptions elsewhere in the region and potential restrictions on US diesel exports.
Crude is heading for a third straight monthly gain, with Brent up more than 70% this year amid prolonged Middle East tensions.
Brent's prompt spread - the difference between its two nearest contracts - has widened to more than $7 a barrel, from less than $1 at the end of last month. The move into deeper backwardation signals stronger demand for barrels available immediately. In Europe, Dated Brent, a key physical-market benchmark, is also trading at a wide premium to futures.
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