Oil Swings on Conflicting US-Iran War-End Talks; WTI Near $98

Oil prices were little changed after swinging sharply on conflicting reports surrounding US-Iran talks to end the war.

Bloomberg reported on October 20 that West Texas Intermediate was trading around $98 a barrel. Brent settled below $109 a barrel after swinging by more than $6 intraday in the previous session.

The volatility was driven by reports on US-Iran negotiations to end the war. Unconfirmed reports that the two sides were close to an agreement sent Brent down as much as 3.3% intraday, pulling it back from a five-month high. Losses later narrowed after a diplomat involved in the talks denied reports that a deal was imminent. US President Donald Trump also said he still had to make a final decision on how to win the war.

Brent has surged about 80% this year as supply disruptions linked to the Middle East and the Russia-Ukraine war persisted. Geopolitical risks have remained elevated, especially as attacks targeting tankers and energy facilities continued. Dan Pickering, chief investment officer at Pickering Energy Partners, said the war was unlikely to end quickly and that market participants were preparing for high oil prices and near-term volatility.

Shipping risks in the Strait of Hormuz also remain. Iran's state-run IRIB News reported that a very large crude carrier hit a mine in the strait, but did not disclose the vessel's identity or when the incident occurred. Recent Iranian attacks have increasingly targeted engine rooms, adding to the damage and increasing pressure on crude transport.

Even so, energy exports from the Gulf are gradually recovering. US Energy Secretary Chris Wright said shipments of crude and other energy products in the region had recovered to about 80% of prewar levels. Refined product supply remains constrained, however. Goldman Sachs estimated that refined fuel exports from the Gulf were still running at about 40% of last year's average because of disruptions at Middle East refineries.

Declining US crude inventories are also supporting prices. The American Petroleum Institute said US crude stockpiles fell by about 4.9 million barrels last week. If official data due on October 21 confirm the drop, US crude inventories will have fallen for a third straight week.