Brent futures settled below US$103 a barrel on Tuesday (Sep 29) after Saudi Arabia restored roughly half the capacity of its East-West pipeline, offsetting a US-Iran stalemate that has kept the Strait of Hormuz closed to formal traffic for weeks.

The kingdom shut the 5 million-bpd conduit — the Petroline linking Eastern Province fields to Red Sea export terminals at Yanbu — on Sep 11 after drone attacks it blamed on Iraqi militias. Reports now indicate about half of its throughput is back, resuming Yanbu oil exports and re-establishing the crucial bypass around the world's most important energy chokepoint.

A steady flow of crude is also moving out of the Persian Gulf through Hormuz on vessels transiting covertly, despite ongoing risks to shipping. Those flows are easing concerns that a deal to reopen the waterway remains elusive.

Washington adds barrels

The US administration compounded the downward pressure on prices. President Donald Trump is releasing up to 40 million barrels from the Strategic Petroleum Reserve, further weighing on crude on Tuesday.

"Increased flows through Hormuz and the restart of Saudi Arabia's East-West pipeline are giving the market some supply relief," said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. "The question is what that means for Iran: diminished leverage over Hormuz could bring it closer to the negotiating table, or prompt it to escalate to regain that leverage."

The front-month Brent contract remains in the triple digits but expires Wednesday (Sep 30). The more active December futures settled near US$96, signalling that traders see the immediate squeeze easing.

Physical market still tight

The retreat follows a month of upheaval in markets for real barrels. Key gauges show a scramble for immediate delivery, freight costs have soared, and fuel prices have surged as global refining capacity remains hobbled.

Crude is still headed for a third consecutive monthly gain following the US war on Iran, the disruption to the Saudi bypass route and potential diesel export curbs from Washington. The global benchmark is up about 70% this year.

The International Energy Agency sees no urgent case for coordinated action. The energy crisis would have to become "much bigger" and more protracted for the agency to put a fresh release of oil stockpiles at the top of its agenda, executive director Fatih Birol said.

Gulf producers adapt

Persian Gulf producers keep hunting for ways to supply markets despite the war. Oman plans to more than double oil storage capacity at a port outside Hormuz, giving customers a way to reduce exposure to the contested waterway.

The conflict is now in its eighth month. US and Iranian negotiators made little progress in talks in New York last week, according to reports. Qatar is holding meetings with both sides and exchanging ideas on possible solutions, a Foreign Ministry spokesperson said Tuesday, with current efforts focused on building common ground.

On the Russia file, Trump is said to support a plan to ease sanctions in exchange for the release of political prisoners, The Atlantic reported, citing US envoy John Coale. Russia is a top oil producer, and sanctions have complicated its crude exports.

Diesel debate intensifies

Diesel prices have climbed on both the Iran conflict and the Russia-Ukraine war, and uncertainty is mounting over potential US measures to curb record prices for the fuel. Over the weekend, Trump said the White House was looking at curbs on diesel exports "very seriously." EU officials are increasingly optimistic Washington will hold off.

TotalEnergies chief executive Patrick Pouyanné warned that a US export ban could backfire. "It's a bad idea," he said, arguing it would force US refineries to cut throughput and potentially drive domestic gasoline prices higher.

The watch items ahead: the pace of the East-West pipeline's return to full capacity, the fate of the proposed US diesel export curbs, and whether Qatar's mediation between Washington and Tehran can produce a framework for reopening Hormuz.