Oil prices extended their rebound on Thursday, with Brent briefly topping $106 a barrel as hopes for a diplomatic breakthrough between the US and Iran faded after talks in New York yielded little progress.
Brent, the benchmark for two-thirds of the world's oil, jumped 2.18 per cent to $105.33 a barrel at 1.44pm UAE time, after spiking by more than 3 per cent to climb above $106. West Texas Intermediate, the gauge that tracks US crude, added 1.77 per cent to $93.79 per barrel.
Prices had fallen sharply on Tuesday on expectations that discussions between the US and Iran on the sidelines of the UN General Assembly could provide greater clarity on the nearly seven-month conflict. But those losses began to reverse on Wednesday as conflicting signals from Tehran cast doubt on the prospects for a breakthrough.
Brent is now up 5.5 per cent this week, while WTI has gained about 2 per cent.
Signals from Iran at UNGA have been mixed. On the sidelines of the summit, Iranian Foreign Ministry spokesman Esmaeil Baghaei said Tehran had conveyed its conditions for reviving diplomacy with Washington through Qatar during a new round of indirect exchanges.
But Iranian security chief Mohsen Rezaei said the country had not changed its conditions for talks with the US and would not negotiate or reopen the Strait of Hormuz until those conditions were met, after Foreign Minister Abbas Araghchi’s contact with American officials in New York.
Meanwhile, sources told The National on Wednesday that Iran had presented the US with a road map to end their conflict, which includes a regionwide ceasefire, the gradual reopening of the Strait of Hormuz and an end to the US blockade of the country.
Supply chain worries were eased on Tuesday after the reopening of Saudi Arabia's East-West pipeline, a vital corridor for the world's biggest oil-exporting nation. The facility was damaged by a drone attack earlier this month.
The kingdom has also sold nearly 100 million barrels of oil to Asian buyers, for delivery in October and November, since the middle of last week as it works to avert a looming supply crunch, traders told Bloomberg.
With the reactivation of the pipeline, “there is more clarity about its impact on the oil market. This pipeline is a key bypass to the Strait of Hormuz and is thus a key building block of the oil market’s conflict resilience”, said Norbert Rucker, head of economics and next generation research at Swiss bank Julius Baer.
“The ever-looming risk of supply disruptions appears to be inflating a persistent risk premium that is embedded in prices. Hence, the oil market continues to price in a supply disruption that has not yet happened,” Mr Rucker added.
