Oil prices fell on Wednesday as investors reacted to signs of possible diplomatic progress between the United States and Iran, while reports of Saudi Arabia restoring a key oil pipeline also eased concerns over regional supply.
Brent crude, the international benchmark, fell below the `$100-per-barrel mark, trading at $98.41, while West Texas Intermediate (WTI), the US benchmark, dropped to $89.23 per barrel in afternoon Asian trading. (Channels Television)
The decline followed comments by US President Donald Trump that American and Iranian representatives had held what he described as a “very good” and “very productive” three-hour meeting at the United Nations.
Trump said another meeting between the two sides had been scheduled for the near future, raising hopes among investors that diplomatic efforts could eventually ease the conflict and restore more oil supplies to global markets. (MarketScreener)
The comments came only hours after Trump delivered a strongly worded address to the United Nations General Assembly, saying he faced a choice between reaching a deal with Iran and taking further military action.
The US and Iran have remained locked in conflict for nearly seven months following US-Israeli strikes, with tensions around the strategically important Strait of Hormuz continuing to weigh on global energy markets.
The waterway is a major route for international oil shipments, meaning prolonged disruption could significantly affect global crude supplies and prices.
Stephen Innes of Quintex Intel said the three-hour US-Iran meeting was significant because it moved market expectations away from an immediate escalation towards the possibility of a diplomatic process, although a final agreement remained uncertain.
Oil prices also came under pressure following reports that Saudi Arabia had restarted operations along its East-West Pipeline, a major export route that was shut down after drone attacks damaged pumping infrastructure.
The 1,200-kilometre pipeline links Saudi Arabia’s eastern oilfields with the Red Sea port of Yanbu, allowing the kingdom to bypass the Strait of Hormuz. The pipeline has a capacity of about seven million barrels per day. (Financial Times)
Saudi Arabia is reportedly preparing to resume exports through Yanbu later this week. The development has helped ease concerns about potential supply disruptions caused by the wider Middle East conflict. (MarketScreener)
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However, the supply outlook remains uneven. Reports indicated that Saudi oil giant Aramco had informed some Asian refiners that crude could soon be available from Yanbu, while European customers were told they would not receive October allocations from the port.
The developments come as global markets continue to monitor the wider economic consequences of the conflict.
Meanwhile, Asian equities were mixed on Wednesday. Hong Kong’s Hang Seng Index fell about one per cent, while Shanghai’s Composite Index closed 0.4 per cent lower.
South Korea’s Kospi and Taiwan’s Taiex, however, gained 0.9 per cent and 0.8 per cent respectively, while European markets opened higher.
Investors were also watching developments in the technology sector following renewed enthusiasm around artificial intelligence, with Chinese technology giant Alibaba announcing plans to expand its overseas data-centre operations across Europe and the Middle East.
The announcement followed the release of new, lower-cost artificial intelligence models by Anthropic and OpenAI within hours of each other.
Attention is also turning to Washington ahead of a scheduled meeting between Trump and Chinese President Xi Jinping on Thursday, with trade expected to feature prominently in discussions between the leaders of the world’s two largest economies.
The US-China trade relationship remains a major concern for investors, despite an extended tariff truce between the two countries.
Market analysts said developments in the Middle East could ultimately have a greater influence on sentiment, particularly if China uses its diplomatic and economic leverage to encourage Iran towards an agreement with Washington.
For the oil market, however, the immediate focus remains on whether the latest US-Iran diplomatic contacts can lead to de-escalation and whether additional Middle Eastern supply can return to global markets.