Oil prices experienced a slight decline on Wednesday as Saudi Arabia initiated the restoration of crude flows via a significant pipeline to the Red Sea. Concurrently, optimism regarding a potential diplomatic resolution in the US-Iran conflict increased in anticipation of discussions at the United Nations in New York. The actions followed a statement from US President Donald Trump on Tuesday, in which he cautioned that he could “annihilate” Iran. He also noted that his envoys, Steve Witkoff and Jared Kushner, had engaged in productive discussions with Iranian mediators with the goal of concluding the conflict. Brent crude futures decreased by 7 cents, or 0.07%, settling at $99.18 per barrel, whereas West Texas Intermediate futures saw a decline of 35 cents, or 0.39%, ending at $90.17 per barrel. “I think there’s a lot of momentum for them to make a deal,” Trump said.

Expectations of stronger oil supply and the possibility of an end to the nearly seven-month conflict pushed Brent below $100 a barrel at Tuesday’s close for the first time since September 8. “I think that a settlement is going to be reached,” Trump said after a meeting with British Prime Minister Andy Burnham on the sidelines of the UN General Assembly ‌in ⁠New York. Furthermore, a sentiment uplift has been noted following Saudi Arabia’s resumption of operations on its East-West Pipeline to the Red Sea on Tuesday, according to sources familiar with the situation, indicating that oil flows from the Middle East are starting to rise. The pipeline was shut down on September 11 following drone attacks, which Saudi Arabia attributed to Iraqi militia, thereby disrupting crude loadings at the kingdom’s Yanbu port. Prior to the disruption, Saudi Arabia was utilising the pipeline to redirect approximately 4 million barrels per day, which accounts for about 4% of global supply, to Yanbu following the US-Israeli conflict with Iran that interrupted oil flows from Saudi Arabia and other Gulf producers via the Strait of Hormuz.

Iraq is also increasing its oil exports, as stated by Oil Minister Basim Mohammed on Tuesday. The country is currently exporting over 3 million barrels per day and anticipates that shipments via Turkey will increase to more than 600,000 barrels per day. JPMorgan, in the current context, has experienced a decline in clarity regarding the trajectory of oil prices. For the first time since the onset of the Iran war in February, the Wall Street bank finds itself without a definitive baseline scenario for the oil market, as intensifying tensions exacerbate worries surrounding an already deteriorating supply shock. “We simply don’t know how to model the endgame,” JPMorgan analysts stated, emphasising the uncertainty surrounding the potential evolution of the conflict. At the onset of the conflict, the bank had presumed that there existed specific economic thresholds that the US administration would refrain from exceeding. Six months into the war, however, many of those lines have been crossed, while there remains no clear exit strategy, according to JPMorgan.

JPMorgan stated on Thursday that it lacks a definitive baseline perspective on oil markets for the first time since the onset of the US-Israeli conflict with Iran, underscoring the prevailing uncertainty facing the market. The potential for additional supply disruptions has progressively elevated the oil price forecast. Daan Struyven stated that recent attacks have demonstrated the potential for disruptions to shipping to escalate and proliferate. Goldman Sachs has presented a scenario where oil prices might surge to $120 a barrel should there be an escalation in attacks on vessels in the Middle East. If exports return to normal, the bank anticipates that oil prices will trend back toward $80 a barrel. Struyven indicated that shipping risks have emerged as a significant factor influencing oil prices. Goldman Sachs anticipates “meaningful upside to crude oil prices” and also projects an increase in natural gas and refined product prices. He noted that supply shocks in petrol and fuels are more significant than those observed in the crude market.