Oil Dips as Saudi Pipeline Restarts

by Bloomberg | M. Gindis, C. Gorrivan, A. Longley
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas

Oil slipped as Saudi Arabia moved to restart its East-West pipeline and traders weighed US-Iran diplomacy.

Oil dipped as Saudi Arabia sought to resume flows on a vital pipeline, while traders parsed clues on the trajectory of the US-Iran war and progress toward reopening the Strait of Hormuz.

Brent edged 1.1% lower to settle near $99 a barrel. The kingdom was in the early stages of starting up the East-West oil pipeline that was halted following drone attacks earlier this month. The country is aiming to restore exports via the line later this week, offering some relief to a market that’s been extra short of supply over the last few weeks. While millions of barrels a day are crossing Hormuz, flows remain below pre-war levels.

On the diplomatic front, world leaders gathered in New York for the United Nations General Assembly, with the future of the Iran war looming over the agenda. US President Donald Trump said that an administration official met with the Iranian delegation and that the meeting lasted for three hours, adding that it “went very well.”

That offset some hawkish notes from earlier in the day, when the US leader threatened Iran’s annihilation during his speech to the assembly. Iran’s delegation left the hall.

Trump also said he has encouraged advisers to approve a ban on fuel exports, a move lawmakers from diesel-dependent states called for in recent days. The controversial step – which several oil and gas executives have warned against – is intended to soothe surging fuel prices as key Middle East refineries run at reduced capacity and Ukraine continues to batter Russia’s energy infrastructure.

Oil has rallied more than 65% this year as the Middle East conflict disrupted shipments through the world’s most important energy chokepoint. Gains have been even bigger in fuel markets.

Prior to its shutdown, the East-West pipeline gave the kingdom the ability to bypass Hormuz and was one of the oil market’s main wartime workarounds to keep barrels flowing. Multiple oil traders said there were already signs of tankers arriving at the port of Yanbu on the Red Sea, from where the 7-million-barrel-a-day pipeline’s crude is exported.

When the conduit was halted, Saudi Arabia pivoted its exports back to the Persian Gulf through Hormuz. Satellite data has shown observed loadings from the key Ras Tanura terminal jumped, with seven ships seen loading there at one point over the weekend. Still, the Yemen-based Houthi militants have continued striking Saudi infrastructure, adding to risks that could jeopardize shipping on that route.

“The elevated flows through the Strait point to a loss of Iranian leverage, which suggests they could be more open to making a deal than previously, but it also increases the probability of escalation in an attempt to reassert control,” said Ryan McKay, senior commodity strategist at TD Securities.

Bloomberg reported that the Gulf Arab states are set to urge Trump to avoid any escalation of hostilities with Iran at a meeting on Tuesday.

The likelihood the US and Iran may eventually reach a deal is still far from certain. Mohammad Bagher Ghalibaf, the speaker of parliament and lead negotiator with the US in previous ceasefire talks, said Trump cannot impose his power on Iran and that the country won’t surrender.

Multiple efforts to end the war that has roiled energy markets for over six months have so far proved fruitless, including an interim peace deal that was in effect for a short period over the summer. Since then, the US has been blockading Iranian ports, limiting vital energy export revenues. In retaliation, Iran has been attacking ships in Hormuz.

Oil Prices

• Brent for November settlement shed 1.1% to settle at $99.25 a barrel in New York
• West Texas Intermediate fell 1.2% to settle at $94.59 a barrel
  • The October contract expires on Tuesday

by Bloomberg | M. Gindis, C. Gorrivan, A. Longley
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas