By Erwin Seba
HOUSTON, Sept 22 (Reuters) – Oil prices fell on Tuesday on increasing flows of Saudi crude with the restart of the East-West pipeline and ship movements through the Strait of Hormuz, through which 20% of global supply moved before the US-Israeli war on Iran began in late February.
Brent and US crude pared their steepest losses of the day after US President Donald Trump dashed hopes that an agreement would come soon, when he said a peace deal would come after the US midterm elections in early November.
Trump also said that without a peace deal he could “annihilate” Iran. Trump was expected to meet with world leaders at the UN in New York this week, feeding hopes for stability in the Middle East and perhaps even progress in ending Russia’s 4-1/2-year-old war in Ukraine.
The Brent crude futures for the November contract settled at $99.25 a barrel, down $1.09, or 1.09%.
The WTI October contract, which expires on Tuesday, finished at $94.99 a barrel, down $1.19, or 1.24%.
At their session lows, both benchmarks were down more than $2 a barrel. Then Trump’s comments burst mounting hopes that a deal could come during this week’s UN General Assembly meeting in New York.
Feeding the optimism, flows through the Strait of Hormuz were seen increasing in recent days.
“Saudi Arabia is acting, not waiting,” said Phil Flynn, senior analyst at Price Futures Group. “After Houthi hits on the East-West pipeline forced a shutdown of Yanbu loadings, Aramco loaded about 14 million barrels of crude onto seven VLCCs inside the Gulf. Satellite and tracker data showed Saudi oil moving through Hormuz averaging about 2.9 million barrels a day over the last six days, up from roughly 700,000 barrels a day in August.”
Saudi Arabia has restarted operations at its East-West Pipeline and could resume exports from Yanbu port later on Tuesday, three sources briefed on the matter said.
Iran can reopen the Strait of Hormuz within seven days if the US eases military pressure and lifts its blockade on Iranian ports, a senior Iranian official told Reuters on Tuesday.
The official said the Iranian delegation to the UN General Assembly in New York has full authority to revive diplomacy with the US.
Hamad Hussain, senior climate and commodities economist at Capital Economics, said the Iranian comments were a sign that diplomacy efforts could be working.
Before US-Israeli attacks on Iran began in late February, the Strait of Hormuz handled about one-fifth of global oil and liquefied natural gas supplies.
“There may also be other obstacles, such as the issue of tolls and fees, to overcome before a lasting solution can be achieved,” Hussain added.
Drone attacks forced Saudi Arabia to shut the pipeline on September 13, halting crude loadings at Yanbu.
Ole Hansen, head of commodity strategy at Saxo Bank, said he does not see much further downside to oil prices until supplies increase through the Strait of Hormuz, particularly of refined products where shortages are most acute.
Diesel prices have rallied in Europe and the US to record highs as wars in Iran and Ukraine sharply cut exports from some of the biggest producers such as Russia, Saudi Arabia and the United Arab Emirates.
(Reporting by Erwin Seba in Houston, Anushree Mukherjee in London, Pranav Mathur in Bengaluru and Trixie Yap in Singapore; Editing by Shri Navaratnam, Louise Heavens, Mark Potter and David Gregorio)