Oil up 1% as Iran official says country will keep enriched nuclear material

[NEW YORK] Oil prices rose about 1 per cent on Wednesday (Nov 11) after the Iranian security chief said Iran would not allow any enriched nuclear material to leave the country, feeding supply worries that lifted prices off two-month lows hit the previous session.

The United States has said nuclear issues must be part of any initial negotiations with Iran aimed at ending their war.

Brent futures settled US$1.27, or 1.39 per cent, higher at US$92.76, while US West Texas Intermediate crude gained 49 cents, or 0.57 per cent, to US$86.53.

In the previous session, oil prices initially fell by more than US$3 a barrel after US officials played down the need for further military strikes against Iran. Prices later pared some losses after an Iranian security official said no talks were taking place between the two sides.

“Oil prices are being supported by fading hopes of an imminent de-escalation,” UBS analyst Giovanni Staunovo said.

While Opec+ crude oil production jumped in October, led by a sharp increase in output from Saudi Arabia, there is little sign of easing disruption in the Strait of Hormuz.

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Data from the Washington Institute for Near East Policy showed that 37 ships were attacked in October, the highest monthly total since the start of the war in February.

“This demonstrates that operational risks have not disappeared simply because diplomatic signals have turned more positive,” said Simon-Peter Massabni, head of business development at XS.com. “More importantly, even if a political agreement is reached, shipping activity is unlikely to return to normal immediately.”

Brent and WTI prices have fallen about 21 per cent and 17 per cent, respectively, since the start of the month on hopes of an end to the war.

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Oil prices ease to two-month lows as US downplays further Iran strikes

Iranian forces have attacked ship navigation systems on the Omani island of Didamar in the Strait of Hormuz, demonstrating Iran’s ability to target infrastructure used to restore Gulf oil flows.

“Even in the event a deal is struck, an increase in flows through the waterway would depend on mine clearance, insurance costs and whether or not shipowners would even be willing to take the risk,” LSEG Oil Research said in a Nov 10 note.

US crude stocks rose by 9 million barrels in the latest week, market sources said, citing data from the American Petroleum Institute. Official data is due on Thursday, delayed a day due to the US Veterans Day holiday on Wednesday.

Data from Kpler shows that Middle East crude and condensate outages have dropped to about 3.8 million barrels per day, with Saudi and Iraqi crude output back to pre-war levels and outages in both countries down significantly.

Elsewhere, Russian and Ukrainian negotiators reported some progress in two days of peace talks in Abu Dhabi that ended on Wednesday, but US mediators said there was a lack of trust between the warring sides and differences remained on major issues, including territory.

“Let’s remember, Russia’s war in Ukraine is almost five years old by now, and there have been efforts at diplomacy throughout the past five years,” Raymond James analyst Pavel Molchanov said. “This is definitely a situation where we will believe it when we see it.”

Ukraine’s military said on Wednesday that its drones struck Russia’s major Baltic port of Ust-Luga, triggering a fire and damaging part of its network of tanks.

Russian oil refining capacity has been reduced by about 30 per cent since late October following renewed Ukrainian drone attacks, industry sources said. REUTERS