Oil prices stabilized after their biggest drop in more than a week, amid signs that Middle East supplies have risen to near pre-war levels, after Saudi Arabia resumed flows through a pipeline that bypasses the Strait of Hormuz.
Brent crude for November delivery traded near $103 a barrel after falling 2.6% in the previous session, while West Texas Intermediate crude traded at around $89.
JPMorgan analysts, led by Natasha Caneva, wrote in a note that average crude oil exports from the Middle East over 10 days have recovered to 17.5 million barrels per day, or 98% of pre-war levels.
This comes after Saudi Arabia restored flows through the East-West pipeline to at least 3.5 million barrels per day, or about half its capacity, according to people familiar with the matter.
It also appears that steady flows of crude oil are leaving the Arabian Gulf through Hormuz on ships that are passing through discreetly, despite the continuing risks to shipping, helping to alleviate concerns arising from the continued difficulty in reaching an agreement to reopen the waterway.
Oil prices also fluctuated sharply due to the possibility of the United States imposing restrictions on diesel exports, as the Trump administration seeks to contain record domestic prices. European officials are increasingly optimistic that Washington will refrain from imposing a ban, which could lead to further global fuel shortages.
Saul Kavonic, senior energy analyst at MST Marquee, told Bloomberg that prices fell as flows through the Strait of Hormuz increased, there was no further escalation from Iran, and potential U.S. restrictions on diesel were postponed.
However, he said that geopolitical volatility, the risk of renewed escalation around the Strait ahead of the US midterm elections and logistical constraints will keep prices high.
Crude oil supplies are recovering while derivatives remain under pressure.
Crude oil is on track for its third consecutive monthly gain, with key indicators pointing to strong demand for immediate delivery despite rising shipping costs. Brent crude has risen by about 70% this year, following more than seven months of conflict in the Middle East.
Fuel prices surged as global refining capacity was hampered and Russia extended export restrictions. Supplies of products like diesel and gasoline from the Middle East also remain constrained, at just 3 million barrels per day, or 58% of pre-war levels, according to JPMorgan.
Meanwhile, the United States will release more oil from its emergency reserves, further bolstering supplies. The release of up to 40 million barrels will be the final installment of the country's 172 million barrel contribution to a coordinated drawdown of global reserves since the start of the war.
In the United States as well, the industry-funded American Petroleum Institute reported that crude inventories rose by 1 million barrels last week, according to a document seen by Bloomberg.
Inventories at the Cushing, Oklahoma, delivery point for West Texas Intermediate crude rose by 233,000 barrels, which would bring them to their highest level since mid-May if official data due later on Wednesday confirms this.
Latest price movements
Brent crude for December delivery, the most active contract, was little changed at $96.12 a barrel at 10:22 a.m. in Singapore.
Brent crude for November delivery, whose contracts expire on Wednesday, rose 0.4% to $103 a barrel.
West Texas Intermediate crude for November delivery fell 0.1% to $89.31 a barrel.
