Oil prices declined today as investors focused on signs of recovering crude exports from the Middle East and lingering concerns over potential supply disruptions in the region stemming from the US-Israeli war on Iran.
Brent crude futures were down $1.96, or 1.86%, to $103.32 a barrel this afternoon. US West Texas Intermediate crude was at $90.65, down $1.95, or 2.11%.
Brent and WTI are headed for monthly gains of around 14% and 5.6%, respectively.
"A clearer picture is emerging of higher oil export volumes leaving the Gulf, but much of that increase still relies on workarounds such as ship-to-ship transfers. Those methods are less efficient and more costly than normal operations, which is why crude prices remain elevated," said KCM Trade chief analyst Tim Waterer.
Crude exports from major Middle Eastern producers climbed to 12.8 million barrels a day in September, the highest since February, preliminary figures from data provider Kpler showed on Monday, helped by increased shipments from Saudi Arabia and the United Arab Emirates.
US and Iranian officials spoke separately with mediators in a renewed effort to end seven months of war, officials of both countries said. Further talks are widely expected to focus on an amended version of a seven-day proposal that Iran presented last week on the sidelines of the United Nations General Assembly.
"The dominant risk remains the US-Iran standoff and its implications for energy prices and inflation expectations," said UOB analysts in a client note.
"Iranian officials have reportedly expressed pessimism about reaching a deal before the Strait of Hormuz situation escalates further, keeping oil supply uncertainty elevated."
The war, which began in late February with US and Israeli attacks on Iran, has focused attention on the Strait of Hormuz, a crucial shipping lane for oil and gas supplies, the disruption of which has upended energy markets.
Meanwhile, the US is considering regulatory relief to allow broader sales of red-dyed diesel to help lower prices, action that could allow some buyers to avoid federal fuel tax, people familiar with discussions told Reuters. The proposal emerged from days of deliberation as a leading alternative to a diesel export ban.
