Oil prices were largely unchanged on Thursday after rising in the previous session, as investors assessed whether the recovery in West Asian crude supply could outweigh ongoing concerns over the region.
Crude oil price on October 1
Brent crude was trading near $98 a barrel after touching $104 during Wednesday’s intraday trade. West Texas Intermediate (WTI) for November delivery fell 0.4% to $90.07 a barrel on Thursday, following a 1.2% gain in the previous session. Both benchmarks had gained about $1 a barrel on Wednesday. Brent posted a monthly gain of around 14% in September, its biggest since July, while WTI rose about 5% during the month.
Wall Street analysts and traders said crude flows from West Asia were nearing pre-war levels, although fuel supplies had recovered at a slower pace. Qatar said on Tuesday that it hoped shuttle diplomacy between Tehran and Washington could result in a breakthrough. Saudi Arabia, meanwhile, resumed oil tanker loadings from Yanbu on Tuesday after restarting its East-West Pipeline.
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Meanwhile, Iranian officials said on Wednesday that Tehran had received Washington’s official response to its latest proposal aimed at ending the seven-month war. The development came days after US President Donald Trump had publicly rejected the proposal, according to Iran’s IRNA news agency.
Iranian Foreign Minister Abbas Araghchi presented the US response to President Masoud Pezeshkian during a Cabinet meeting, government spokesperson Fatemeh Mohajerani said.
Crude prices rose for a third consecutive month in September as Washington and Tehran failed to make progress towards a lasting peace agreement that would allow the Strait of Hormuz to fully reopen. Months of volatile negotiations since the US and Israel launched the war in February have resulted in sharp price swings, making it difficult for traders to gauge the direction of crude prices.
The situation has been further complicated by attacks on merchant vessels and strikes by Tehran-aligned militants targeting Saudi Arabia’s East-West pipeline, adding to existing concerns over oil supplies.
Where are prices headed?
"We simply don't know how to model the endgame," JPMorgan analysts said, highlighting the uncertainty over how the conflict could develop. When the conflict began, the bank had assumed there were economic thresholds the US administration would not cross. Six months into the war, JPMorgan said many of those thresholds had been crossed, while there was still no clear exit strategy.
The risk of further supply disruptions has also increased the possibility of higher oil prices. Daan Struyven, co-head of global commodities research at Goldman Sachs, said recent attacks had shown that disruptions to shipping could spread and become more severe.
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Goldman Sachs has outlined a scenario in which oil prices could rise as high as $120 a barrel if attacks on vessels in the Middle East intensify. If exports return to normal, the bank expects oil prices to move back towards $80 a barrel.
Struyven told Bloomberg that risks to shipping had become a key driver of oil prices. Goldman Sachs sees "meaningful upside to crude oil prices" and also expects natural gas and refined product prices to rise. Struyven said supply shocks in gas and fuels are larger than those in the crude market.
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