Oil declines amid hopes for opening a diplomatic opportunity
Oil prices fell to their lowest level in 11 days today, as investors hope that the United Nations General Assembly meetings, scheduled for this week, will offer an opportunity for diplomatic progress regarding the war with Iran, while anticipating a partial recovery in oil shipments from Saudi Arabia.
Futures for Brent crude and the US benchmark West Texas Intermediate (WTI) touched their lowest levels since September 10 earlier today. Brent crude for November delivery fell $2.12, or 2 percent, to $101.75 per barrel.
WTI crude for October delivery, which expires on Tuesday, dropped $1.96, or 2 percent, to $98.34 per barrel, while the November contract settled at $94.16.
The average price of diesel in the United States surpassed $6.50 per gallon for the first time, sparking speculation that the administration of President Donald Trump might impose restrictions on diesel exports to keep more fuel in the domestic market.
According to data from the American Automobile Association (AAA), the national average price of diesel rose to $6.505 by Saturday, marking an increase of more than 87 cents since the beginning of September, with prices continuing to climb almost daily.
Global diesel supplies have shrunk due to the conflict between the United States and Iran, as shipments through the Strait of Hormuz continue to decline. Oil exports from the region have not returned to pre-war levels, limiting fuel production at refineries worldwide.
Russia has also banned most diesel exports, with restrictions extended until October, coinciding with ongoing Ukrainian drone attacks on refining facilities.
High diesel prices are expected to remain a source of cost pressure on transportation, agriculture, and heating, amid continued global supply constraints. This could increase political pressure on the US administration to contain prices as the midterm elections approach, despite warnings from officials that restricting exports would have limited impact.
Iran and the United States exchanged new threats on Sunday, although US President Donald Trump stated he would be open to meeting Iranian President Masoud Pezeshkian, who is expected to be in New York this week to attend the UN General Assembly.
Tim Waterer, a market analyst at KCM Trade, said, “It appears that some risk premium is being unwound from oil prices amid hopes that a diplomatic path to de-escalation in the war between the United States and Iran will emerge this week.”
However, tensions in the Middle East remained high. The Iran-aligned Houthis said they attacked “sensitive” sites in the Saudi capital, Riyadh, on Saturday, using missiles and drones, as well as a facility belonging to Aramco in the Red Sea city of Yanbu, a key oil export hub.
Fars News Agency quoted Iranian Revolutionary Guard Corps spokesperson Hossein Mohabi as saying that Iran would use new weapons and target sites it had not previously attacked if the United States launched a new assault on it.
Houthi attacks on Aramco’s East-West Pipeline prompted the state-owned energy company to increase its exports through the Strait of Hormuz during the current and next month, after halting some shipments via Yanbu.
Analysts at JPMorgan wrote in a September 18 note: “Oil flows from the Middle East remain surprisingly robust, despite the disruption of Saudi Arabia’s East-West pipeline.”
They added, “The most prominent shift came from Saudi Arabia,” noting that satellite data showed the average flow of Saudi oil passing through the Strait of Hormuz reached 2.9 million barrels per day over the past six days, up from just 700,000 barrels per day in August.
Tim Waterer, markets analyst at KCM Trade, said, “It appears that some risk premium is being stripped out of oil prices amid hopes that a diplomatic path to de-escalation in the war between the United States and Iran will emerge this week.”
A Singapore-based broker said West Texas Intermediate crude broke through a key psychological support level at $100 per barrel, while some investors may have rolled their positions from October contracts to November contracts a day before expiration.
Today’s shipment data showed that a total of 17 bulk commodity vessels transited the Strait of Hormuz at the start of the week, down from 37 vessels a week earlier, as tensions in the Gulf persisted with the situation between the United States and Iran remaining in a stalemate.
Navigation activity detectable through the strait, which was a conduit for one-fifth of the world’s oil and liquefied natural gas supplies before the war, has declined significantly, but Middle Eastern producers continue to export oil on tankers that sail with their transceivers turned off.
Data from Kpler and the London Metal Exchange showed that the tanker Penios was carrying 2 million barrels of Iraqi Basra crude off Fujairah in the United Arab Emirates to another ultra-large crude carrier, the New Constant, which is expected to head to China.
Neither Dynacom, which operates the Penios, nor Associated Maritime Co. K.H. Ltd, which operates the New Constant, responded to requests for comment.
Kpler and LME data showed that the liquefied natural gas carrier Shandong Redwood, loaded with a cargo from Qatar’s Ras Laffan port, transited the Strait of Hormuz on September 19 en route to Pakistan. Shandong Marine Energy, which operates the vessel, had not responded to a request for comment.
Before the start of the US-Israeli war with Iran on February 28, the strait typically saw around 125 large commercial vessels daily, including oil tankers, gas carriers, bulk cargo ships, and container vessels.
Houthi attacks on Saudi Aramco’s East-West Pipeline, a major alternative route for Saudi oil flows during the war with Iran, have prompted the state energy company to increase its exports through the Strait of Hormuz in the current and coming months.
Kpler data showed that 22 tankers, mostly ultra-large crude carriers, carrying 42 million barrels of crude oil left the Strait of Hormuz in the week ending September 13. Saudi Arabia and Iraq each accounted for 43 percent of the total volume.
According to Kpler data, 51 vessels transited the Bab el-Mandeb strait at the southern end of the Red Sea, and 33 vessels departed at the start of the week, including an Aframax tanker carrying around 700,000 barrels of Saudi crude.
This represents a decrease from 57 vessels at the start of the previous week. No oil loading operations have been recorded at Saudi Arabia’s Red Sea port of Yanbu since September 16.
An Iraqi official suggested that initial crude oil production from the Qurnain oil field in Najaf province, in cooperation with China’s Zhenhua Oil, could begin in early 2027.
Abdul Hussein Al-Shibli, advisor to the governor of Najaf, said on Monday that the first phase of the Qurnain field development project involves drilling four wells, with expectations for the first well to begin production in January next year.
He added that the anticipated initial production is neither export-oriented nor commercially significant in the economic sense; rather, it is preliminary and experimental, providing precise operational data that will help determine the field’s actual reserve size instead of relying on theoretical estimates, according to the German News Agency (dpa).
Al-Shibli said the first exploratory well recorded an initial production of approximately 3,240 barrels per day, with a clearer picture of reserve and production volumes expected to emerge after next June, following the completion of drilling and evaluation operations.
He noted that confirming these estimates could place Najaf province in a highly prominent position on Iraq’s oil production map, potentially ranking it second or first in production, depending on the actual outcomes of the operations.
Zhenhua Oil, in cooperation with Midland Oil Company, is carrying out development operations for the Al-Qarnain field. Preliminary estimates indicate that the Al-Qarnain field, which the Ministry of Oil announced it had discovered in 2026, spans an area of 8,770 square kilometers and contains potential hydrocarbon reserves estimated at more than 8 billion barrels of light crude oil, with indications of associated gas quantities.
Iraq has begun implementing a government plan to raise crude oil production capacity from 4.8 million barrels per day to 10 million barrels per day by 2030, in collaboration with major international companies to bolster Iraq’s crude oil production capabilities, in line with its vast reserves exceeding 150 billion barrels.
