Oil prices fell over 2% as markets weighed growing hopes of a US-Iran truce against fresh concerns over oil supplies from Saudi Arabia. Talk of a possible US ban on diesel exports also added pressure, widening the gap between US and global crude benchmarks.Brent crude fell $2.28, or 2.14%, to $104.30 a barrel, while West Texas Intermediate (WTI) dropped $2.20, or 2.33%, to $92.41. The moves left Brent up less than 1% over the week, while WTI was down about 8%.The latest decline came as US and Iranian negotiators in New York explored a phased route out of the war. According to sources close to the talks, the proposed path would involve Tehran reopening the Strait of Hormuz in return for Washington lifting its economic blockade of Iran.Iran, however, has indicated that the talks would not mean a change in its position on its nuclear programme. “Iran, however, said it will show no flexibility over its nuclear program even if the US accepts its proposal to reopen the Strait of Hormuz, which calls for steps including lifting a US naval blockade on Iranian ports,” a senior Iranian official told Reuters on Friday.The Strait of Hormuz remains a key focus for oil markets, with crude flows out of the waterway reaching 33.7 million barrels in the week starting September 20, according to preliminary ship-tracking data from Kpler. The figure kept exports roughly in line with the previous week’s levels.Before the Middle East conflict began, about 20% of the world’s oil supplies moved through the strait.US discussions around a possible ban on diesel exports have emerged as another factor influencing crude prices. The prospect is widening the spread between US crude futures and the global Brent benchmark, indicating that markets expect US refiners to process less crude if they are unable to export their diesel output.The Brent premium over WTI rose to its highest level since May for a third consecutive day. The market is meanwhile keeping a close watch on developments in Saudi Arabia, where attacks by Yemen’s Iran-aligned Houthis have raised concerns over disruption to oil flows.Saudi, Turkish and Pakistani military chiefs are due to discuss assistance for Saudi Arabia as it faces attacks by the Houthis.The group has launched strikes against the Saudi-backed government in Yemen and repeatedly fired into Saudi Arabia, disrupting oil flows from the world’s largest energy exporter. The attacks form part of the wider Middle East war that began with US and Israeli strikes on Iran on February 28.Despite the attacks, flows through the Strait of Hormuz remained broadly steady during the latest week, according to the preliminary Kpler data.Meanwhile, the Iran conflict is now heading towards the seven month mark, keeping oil markets on the edge.
