Oil Slides as Middle East Supply Risks Begin to Ease    

Key Takeaways:

*Oil extends its decline as Brent and WTI retreat on easing Middle East supply concerns and hopes for U.S.-Iran diplomacy.

*Saudi exports are recovering, with oil flows through the Strait of Hormuz rising sharply and Aramco increasing Gulf shipments.

*U.S.-Iran talks remain the key catalyst, with successful diplomacy potentially reducing oil’s geopolitical risk premium.

Market Summary:

Oil prices remain highly headline-sensitive, but the fundamental picture has shifted somewhat as concerns over an immediate supply shock have eased. Brent and WTI extended their recent decline over four sessions, with Brent briefly falling toward the $100/bbl area and WTI into the mid-$90s, before recovering modestly on Tuesday. The rebound appears to be more of a short-covering move than a fundamental reversal, with traders waiting for clearer developments around potential U.S.-Iran negotiations at the UN General Assembly. President Donald Trump has indicated openness to meeting Iranian President Masoud Pezeshkian, while Iran has reportedly communicated conditions for re-entering negotiations. If diplomacy makes tangible progress, the geopolitical risk premium could continue to unwind; however, any breakdown in talks could quickly restore upward pressure on crude.

On the supply side, Saudi Arabia’s export recovery has become a major bearish influence. Following attacks that disrupted its East-West Pipeline and forced some shipments through Yanbu to be halted, Saudi Aramco has significantly increased crude shipments through the Strait of Hormuz. Satellite data showed Saudi flows through Hormuz averaging around 2.9 million barrels per day over the past six days, sharply above roughly 700,000 bpd in August, while Aramco loaded approximately 14 million barrels onto seven VLCCs at Ras Tanura on September 20. The recovery in Gulf exports has helped convince markets that Saudi Arabia can continue moving substantial volumes despite the pipeline disruption, reducing fears of an immediate physical shortage.

However, the physical oil market remains far from normal, leaving a significant upside risk if regional disruptions worsen. Commercial vessel traffic through Hormuz remains heavily constrained compared with pre-conflict levels, while Saudi Arabia is increasingly dependent on the strategically important waterway after attacks disrupted alternative Red Sea routes. At the same time, Houthi attacks on Saudi targets, including Riyadh and an Aramco facility in Yanbu, continue to threaten regional energy infrastructure. The UK has also announced limited defensive military support for Saudi Arabia amid the renewed Houthi attacks, highlighting the continued geopolitical risks surrounding regional oil flows.

Elsewhere, Libya has introduced another supply-side risk after an armed group closed a valve on the pipeline carrying crude from the Sharara oilfield to Zawiya, significantly reducing production from one of the country’s key fields. This adds to the existing Middle East supply uncertainty, although its impact is relatively small compared with the broader Saudi and Hormuz disruptions. Overall, oil fundamentals are currently caught between easing geopolitical risk and improving Saudi export flows on one side, and persistent infrastructure attacks, constrained shipping and potential production losses on the other. For the near term, U.S.-Iran diplomacy, Hormuz shipping activity, Saudi pipeline recovery and further attacks on regional energy infrastructure remain the key catalysts capable of determining whether crude continues consolidating around $100 or regains its recent upward momentum.

Technical Analysis 

Crude Oil, H4

Crude oil remains under strong selling pressure after breaking below the rising trendline and the 98.65 support level. Price has continued to form lower highs and lower lows from the 105.60 resistance area, with the latest decline bringing it down to around 92.85, close to the 92.45 support. The former uptrend has been invalidated, and price is now testing an important support zone.

Momentum remains bearish, although selling pressure is becoming stretched. RSI is around 33, approaching oversold territory, suggesting that downside momentum remains strong but a short-term technical rebound could develop. MACD is firmly below zero, with the MACD line below the signal line, while the histogram remains negative. This confirms that bearish momentum is still dominant, despite the recent moderation in the histogram.Overall, the bias remains bearish, while the near-oversold RSI leaves room for a short-term rebound from the current support area.

Resistance Levels: 98.65, 105.60

Support Levels: 92.85, 87.50