- Middle East exports have increased gradually despite the ongoing tensions.
- G7 countries agreed to release diesel and crude stocks to lower prices.
- The US might resume bombing Iran before the midterm elections.
Oil has remained subdued in a tight range in recent days amid easing supply worries. Middle East exports have gradually recovered and are nearing pre-war levels. At the same time, G7 countries agreed on Friday to release diesel and crude stocks to loosen the market. However, reports on Wednesday revealed that Trump might resume bombing Iran before the US elections.
Since the UN meeting, market participants have remained cautious due to uncertainty regarding the future. The US and Iran failed to reach an agreement, but talks continued indirectly. Nevertheless, it was a welcome pause after heavy attacks that sent oil prices soaring. Still, the likelihood of a prolonged war has increased.
Strait of Hormuz traffic (Source: Bloomberg Opinion)
With little progress in diplomacy, focus shifted to the rising exports from the Middle East. Reports have indicated that supply has increased gradually despite the ongoing tensions. This is because of alternative routes and a normalization that has allowed these countries to adapt to the current conditions.
Furthermore, G7 countries met on Friday last week and agreed to release diesel and crude stocks to lower prices and increase global supplies. Traders were also focused on the US non-farm payrolls report, which indicated a slowdown in the labor sector.
According to the report, the economy added 29,000 new jobs in September, missing the forecast of 89,000. At the same time, the unemployment rate unexpectedly increased to 4.2%. The downbeat numbers eased pressure on the Fed to hike interest rates. Instead, traders now expect a pause at the October meeting. High interest rates slow down borrowing and the economy at large, reducing demand for fuel. As a result, oil prices recovered briefly after the G7 report.
Elsewhere, reports on Wednesday revealed that Trump was not too keen about a peace deal with Iran. Instead, the US might resume bombing Iran before the midterm elections, which would reignite the oil rally.
“I think the deal isn’t really something that I want to do, but they’re willing to offer us anything to stop,” Trump said at a campaign rally with Republican candidates in San Antonio, Texas, late Wednesday stateside.
“Steve Witkoff, the US special envoy to the Middle East, has been working on the deal and “doing very well,” Trump added.
