By Sethuraman N R and Helen Clark
NEW DELHI/PERTH, Sept 25 (Reuters) – Oil prices fell on Friday as markets weighed the possibility of a truce between the US and Iran against concerns that increasing attacks against Saudi Arabia by Houthi rebels could disrupt supply from the key Middle Eastern producer.
Brent was down $1.47, or 1.4%, at $105.11 a barrel at 0541 GMT, while West Texas Intermediate (WTI) was down $2, or 2.1%, at $92.61 a 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 Washington lifting its economic blockade of Iran, sources close to the talks said this week.
On Thursday, Iranian President Masoud Pezeshkian said it was up to the US to choose when the Iran war will end.
Since the war began at the end of February, around a fifth of the world’s oil and gas shipments have been curtailed.
“Diplomatic hopes are essentially helping oil prices weather the latest military strikes in the Middle East, with crude trading moderately softer despite the attacks,” said Tim Waterer, chief analyst at KCM Trade.
On Thursday, oil prices touched a one-week high, with both contracts rising as much as 5%. For the week, Brent is up 1.7%, while WTI is down 7.2%.
The spread between Brent and WTI is the widest it has been since May at $12.50 a barrel.
Fears of a US ban on diesel exports that could flood the domestic market are largely responsible for the price bifurcation, given that the two benchmarks usually rise and fall in tandem, despite the US contract usually selling for a discount.
“The widening Brent-WTI spread reflects a growing divergence between global supply risks and U.S. market fundamentals,” said Sugandha Sachdeva, founder of SS WealthStreet, a New Delhi-based research firm.
Brent is carrying a substantial geopolitical risk premium as Gulf supplies remain constrained, while higher US production, inventories is keeping the WTI at a substantial discount to Brent, Sachdeva said.
Saudi Arabia intercepted six ballistic missiles fired by Yemen’s Iran-backed Houthis, thwarting attacks on the southern province of Taif and the Yanbu area on the Red Sea, the Saudi-led coalition in Yemen said.
Saudi Arabia is building up crude pumping volumes through its East-West Pipeline that runs to its Red Sea export hub of Yanbu, although crude tanker loadings have yet to resume, according to industry sources, satellite imagery and shipping data.
(Reporting by Helen Clark and Sethuraman NR; Editing by Thomas Derpinghaus and Christian Schmollinger)
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