Economy
Crude Oil Prices Drop 2% on Truce Hopes, Possible US Diesel Export Ban
By Adedapo Adesanya
Crude oil prices fell about 2 per cent on Friday on mounting hopes for a truce between the US and Iran and talks of a possible ban on diesel exports by America.
Brent futures dropped $2.28 or 2.1 per cent to settle at $104.32 a barrel, while US West Texas Intermediate (WTI) crude declined by $2.20 or 2.3 per cent to $92.41 per barrel.
US and Iranian negotiators in New York are exploring a phased path out of war that would involve Tehran reopening the Strait of Hormuz and the American government lifting its economic blockade of Iran.
Iran, however, said it will show no flexibility over its nuclear program even if the US accepts its proposal to reopen the Strait of Hormuz, which calls for steps, including lifting a US naval blockade on Iranian ports.
Talks of a possible US ban on diesel exports are widening the gap between its crude oil futures and the global Brent benchmark, a signal that markets expect US refiners to process less crude oil if their diesel output gets stuck at home.
Meanwhile, traders are worried that increasing attacks against Saudi Arabia by Houthi fighters could disrupt supply from the Middle Eastern producer.
Saudi, Turkish and Pakistani military chiefs are also discussing help for Saudi Arabia as it faces attacks by Yemen’s Iran-aligned group.
The Houthis have launched strikes on the Saudi-backed government in Yemen and repeatedly fired into Saudi Arabia, disrupting oil flows from the world’s largest energy exporter, part of a wider Middle East war that began with US and Israeli strikes on Iran on February 28.
Crude oil flows out of the Strait of Hormuz reached 33.7 million barrels in the week starting September 20, preliminary ship-tracking data from Kpler showed on Friday, putting exports roughly on track with the previous week’s levels. Before the start of the Iran war, about 20 per cent of the world’s oil supplies moved through the strait.
Also, US President Donald Trump made clear during talks with Chinese President Xi Jinping that Chinese help for Iran is unacceptable. Any agreements to reduce trade tensions between the US and China could boost economic growth and demand for energy.
The US has proposed that the United Arab Emirates host a trilateral meeting with Ukraine and Russia to discuss efforts to end their 4½-year-long war, Ukrainian President Volodymyr Zelenskiy said.
Russian President Vladimir Putin said all proposals for a settlement in the war with Ukraine remained on the table, but it still needed to assess what was in its best interest.
