Oil prices experienced significant volatility, initially falling before surging. Global benchmark Brent dropped towards $102 a barrel, while West Texas Intermediate (WTI) was near $91 earlier in the day, following US Treasury Secretary Scott Bessent's statement that 17 million barrels "sometimes" transited the Strait of Hormuz daily. This decline was attributed to the unwinding of geopolitical risk premiums as Gulf supply recovered and hopes for a US-Iran diplomatic breakthrough grew, according to Priyanka Sachdeva, head of market insights at Phillip Nova Pte Ltd.
However, oil prices reversed course dramatically, jumping about 4% later in the day. Brent futures rose $4.10, or 4.0%, to $107.18 a barrel, while WTI crude rose $3.66, or 4.0%, to $95.82. This surge was triggered by Yemen's Iran-backed Houthis firing missiles at Saudi Arabia and a lack of progress in diplomatic talks between the US and Iran. Saudi Arabia is also working to restart oil exports via its critical East-West pipeline, which was damaged in earlier attacks and feeds the Red Sea coast as an alternative to the Strait of Hormuz.
The market is also closely watching developments around US diesel exports. Diesel prices have rallied harder than crude, with US retail prices reaching record highs. President Donald Trump had encouraged advisers to support a ban on diesel exports, and US diesel futures edged higher despite slumping earlier on Wednesday due to this speculation. Energy Secretary Chris Wright noted the administration is working with refiners to voluntarily reduce shipments, rather than imposing an outright ban. Analysts warn that a US diesel export ban could worsen global supplies and disrupt economies, with US diesel futures trading up over 5% on Thursday morning.
The premium of Brent crude over WTI also rose to its highest since May for a second consecutive day, making it more economic for energy firms to send vessels to the US for crude exports. However, the cost of chartering tankers has soared, leading to a decline in US crude exports. Weekly US crude exports were just 3.3 million barrels per day during the week ended September 18, a significant drop from the record high of 6.4 million barrels per day in April when charter costs were lower. US crude inventories also rose by 3 million barrels to 426.4 million barrels last week, contrary to analyst expectations for a 641,000-barrel draw.
