Oil Prices Climb as U.S.-Iran Stalemate Overshadows Higher Saudi Output

Oil prices rose on Tuesday, extending the previous session's gains, as a lack of progress in U.S.-Iran diplomatic talks kept geopolitical supply risks at the forefront for investors. The market's focus on potential Middle East disruptions overshadowed evidence of recovering crude exports from the region.

As of 21:23 ET (01:23 GMT), Brent crude futures for November delivery increased 1.3% to $106.60 per barrel. West Texas Intermediate (WTI) crude futures saw a 1.1% gain, reaching $93.60 per barrel.

Diplomatic Impasse Fuels Supply Jitters

The primary driver for the price increase is continued uncertainty surrounding U.S.-Iran relations. Reuters reported that Qatari mediators were set to hold separate discussions with U.S. and Iranian officials regarding an amended proposal from Tehran. However, sources cited in the report indicated that both sides remained pessimistic about reaching an agreement before the U.S. midterm elections, stoking fears of continued instability and potential supply disruptions in the critical oil-producing region.

Rising Middle East Flows Offer Counterpoint

Geopolitical concerns are currently outweighing signs of a healthier physical market. According to preliminary data from Kpler, crude exports from major Middle Eastern producers rose to 12.8 million barrels per day in September, the highest level recorded since February. The increase was largely driven by higher shipments from Saudi Arabia and the United Arab Emirates.

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Saudi Arabia's export capacity has improved following the repair of its East-West pipeline, which was previously damaged. The pipeline, which bypasses the strategic Strait of Hormuz, has resumed shipments from the Red Sea port of Yanbu. The Wall Street Journal reported that while the pipeline has a capacity of up to 7 million barrels per day, it was transporting about 3.5 million bpd after the restart.

Market Impact and Refined Products

Despite the higher export volumes, the market remains tight. Transporting crude through the Gulf is reportedly still difficult and costly, which has had a knock-on effect on refined-product markets. Diesel prices have hit record highs, prompting the White House to consider regulatory changes, according to Reuters.

Furthermore, speculation over potential U.S. restrictions on diesel exports has contributed to a widening of the spread between Brent and WTI benchmarks, a key indicator watched by traders and analysts.