Oil prices have risen for a second day as uncertainty surrounding US-Iran talks and strong demand outweigh the partial resumption of flows through Saudi Arabia's East-West pipeline. Brent crude traded above $107 a barrel, with West Texas Intermediate around $94. Iranian officials privately express pessimism about reaching a deal with the US to end hostilities and reopen the Strait of Hormuz before the US midterm elections in November, particularly after President Donald Trump rejected a proposal to resume full traffic through the waterway within seven days.
Saudi Arabia has restored approximately half of the flows through its critical East-West pipeline, a route that bypasses the Strait of Hormuz. This pipeline, which had operations halted earlier this month due to drone strikes, is now moving at least 3.5 million barrels a day. Loadings at the Red Sea port of Yanbu resumed last week, achieving about half of its 7 million barrel-a-day capacity by the end of the week. This partial restoration follows increased shipments through the Strait of Hormuz in recent weeks, with Saudi Arabia's average crude exports for September reaching their highest levels since the start of the conflict.
Despite the pipeline repairs, geopolitical risks persist. Yemen's Houthi militants continue to threaten energy infrastructure in Saudi Arabia and other Gulf states, posing an ongoing risk to oil prices. While the restart of the East-West pipeline initially led to a slight dip in Brent crude from $108 to $105.28, the overall market remains tight. Key gauges of supply tightness, such as Brent's prompt spread widening to over $7 a barrel from less than $1, indicate strong demand for quickly deliverable barrels. Haris Khurshid, chief investment officer at Karobaar Capital LP, noted that while there's enormous geopolitical risk, the market has not seen the sustained repricing expected if physical supply was about to materially deteriorate, though he believes Brent faces greater downside than upside risk.
