Oil Softens after Red Sea Export Restart Eases Supply Woes


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Oil prices softened Tuesday (9/29) morning as signs of 
higher Middle Eastern oil supply outweighed concerns over stalling U.S.-Iranian 
negotiations.

   By 08:50am ET, ICE Brent for November delivery was down $2.17 to trade near 
$103.11 bbl, and NYMEX WTI for November delivery fell $2.21 to $90.39 bbl.

   Downstream, NYMEX ULSD for October delivery slid $0.0853 to $4.67 gallon, 
and front-month RBOB futures retreated $0.0517 to $3.286 gallon.

   The US dollar index strengthened by 0.16 points to 101.085 against a basket 
of foreign currencies.

   Saudi Aramco last week partially restored flows on its East-West pipeline, 
allowing exports from the Red Sea port of Yanbu to resume after a two-week 
hiatus. In combination with oil shuttling operations in the Gulf of Oman 
running near maximum capacity, and an increasingly porous Iranian blockade of 
the Strait of Hormuz, Middle Eastern oil exports have rebounded to their 
highest since the start of the war in late February. Ship-tracking experts 
estimate flows to now average around two thirds of pre-war levels.

   U.S. and Iranian diplomats, meanwhile, continued the indirect exchange of 
messages via mediators after the White House on the weekend rejected Tehran's 
offer of a temporary ceasefire and a mutual lifting of naval blockades akin to 
June's so-called memorandum of understanding. While market participants 
welcomed the resumption of diplomatic efforts, reports suggested that 
negotiations have so far yielded little progress.

   Oil futures remained well on track for a third consecutive monthly increase. 
Supply, particularly of refined products, continued to fall short of meeting 
demand, as evidenced by globally rescinding inventories. In the U.S., 
distillate fuel oil inventories continued to hover near seasonal decade-lows, 
trailing the five-year average by 12%, according to the most recent Energy 
Information Administration (EIA) data. Weekly inventory estimates from the 
American Petroleum Institute are scheduled for release later today, followed by 
official EIA data on Wednesday.

    




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