Oil Prices Fall As US-Iran Talks Show Signs Of Progress

Oil prices declined on 25 September, as traders assessed signs of progress in discussions between the US and Iran over reopening the Strait of Hormuz. The waterway is a major route for global energy shipments.

West Texas Intermediate (WTI) futures fell about 2.3% to settle near $92 a barrel. The decline marked WTI's first weekly fall since late August.

The US and Iran are reportedly seeking a breakthrough that could see Tehran reopen the Strait of Hormuz. In return, Washington could ease its blockade of Iranian ports.

Traders Remain Cautious Over Supply Outlook

Despite the diplomatic developments, traders remain cautious. Similar efforts between the two sides have come close to an agreement before, only for negotiations to break down.

Physical oil markets also continue to show signs of tight supply. Brent's prompt spread has widened to almost $7 a barrel, compared with less than $1 at the end of August. This backwardation structure generally indicates tighter near-term supply conditions.

Traders also paid record premiums on Thursday to secure immediate supplies at Cushing, Oklahoma, the main US crude storage hub. In Europe, Dated Brent has also been trading at a significant premium to futures.

Some European refiners were informed that they would receive no crude in October under long-term agreements with Saudi Arabia. The development followed the shutdown of Saudi Arabia's East-West pipeline after attacks.

Shipping Risks And Diesel Ban Speculation Persist

Crude shipments through the Strait of Hormuz have continued, but risks to maritime traffic remain. A cargo vessel was reportedly left burning and adrift after being hit by an unidentified projectile earlier this week. Saudi Arabia also intercepted missiles targeting Yanbu and Taif on Thursday. The attacks came as Iran-backed Houthi militants launched further strikes.

Meanwhile, markets are also watching speculation that the White House could introduce a temporary ban on diesel exports. US economic advisers are reportedly examining the potential impact of such a measure. Traders and analysts remain sceptical about the proposal. They expect any initial reduction in domestic diesel prices to be temporary.

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