Oil falls: Tehran talks and Aramco supply to Europe
Brent slips on peace talks in Tehran, profit-taking and extra Aramco cargoes for Europe, while Houthi and Hormuz risks persist.
Key Takeaways
- Brent slips at the start of the week as peace talks in Tehran and profit-taking weigh on crude.
- Saudi Aramco is offering European refiners extra crude at a discount as its exports recover.
- Brent momentum is bearish short term but still bullish on the daily and weekly view.
Oil turns defensive on Tuesday. According to OilPrice.com, Brent traded at $114.85 a barrel in the morning and WTI at $100.87. Both grades sat well below last week's levels, when Brent was still above $117. At the same time, Saudi Arabia reports a return to more normal deliveries to Europe.
Diplomacy and profit-taking weigh on prices
Two things triggered the decline. First, officials from Saudi Arabia, Turkey and Pakistan traveled to Tehran to discuss an end to hostilities. Second, traders used the multi-month highs to lock in gains. Analyst Sugandha Sachdeva describes the move as classic profit-taking, according to OilPrice.com.
The risks remain tangible, though. The Houthis keep attacking Saudi energy facilities, and Iranian attacks on tankers near the Strait of Hormuz keep insurance premiums elevated. A CNN report picked up by OilPrice.com also cites a possible 96-hour window for a U.S. strike on Iran after an order from President Donald Trump. The author therefore considers a quick peace deal unlikely.
During the day, Brent slipped to around $109.62 in our snapshot. The International Energy Agency warns this week that the disruption to energy supply is likely to last into next year.
Aramco opens the tap to Europe
Physical supply is easing in parallel. As OilPrice.com reports citing Bloomberg, Saudi Aramco is offering European refiners additional cargoes for October and November. Late-October lots are reportedly priced below the Official Selling Price (OSP). Loading is from Yanbu on the Red Sea or Sidi Kerir on Egypt's Mediterranean coast.
The contrast with last month is notable: only a few weeks ago, Aramco told customers that no contract volumes would flow in October. An attack had knocked out the East-West pipeline, which is running again. For November, refiners are to receive their full contracted volumes.
Saudi Arabia normally ships 700,000 to 800,000 barrels per day to Europe. Output rose by about a third in September to more than 8 million barrels per day, after falling in August to its lowest level in more than three decades. The United Arab Emirates is also producing at a record level, according to the IEA, and Iraqi exports are nearing pre-war levels.
What momentum says
Momentum signals a mixed picture for Brent. It is bearish on the one-hour and four-hour views and bullish on the daily and weekly views. The pullback fits a counter-move within a broader uptrend rather than a confirmed trend break.