Oil prices edged lower on Wednesday as Saudi Arabia began restoring crude flows through a key pipeline to the Red Sea, while prospects of negotiations between the US and Iran raised expectations of an improvement in global supplies.
Brent crude futures declined 0.07 per cent to $99.18 a barrel as of 0119 GMT, while West Texas Intermediate (WTI) futures fell 0.39 per cent to $90.17 per barrel.
Brent had closed below $100 a barrel on Tuesday for the first time since September 8, reflecting easing concerns over supply disruptions that have kept the oil market elevated in recent weeks.
Saudi Arabia Restarts East-West Pipeline
Saudi Arabia restarted operations on its East-West Pipeline on Tuesday after it was shut on September 11 following drone attacks blamed by Riyadh on an Iraqi militia.
The shutdown had halted crude loadings at the kingdom's Yanbu port.
The pipeline has become particularly important since the US-Israeli conflict with Iran disrupted oil flows from Saudi Arabia and other Gulf producers through the Strait of Hormuz.
Riyadh has been using the route to redirect around 4 million barrels per day (bpd), equivalent to roughly 4 per cent of global oil supply, towards the Red Sea port of Yanbu.
Its restart has therefore improved expectations around the availability of Middle Eastern crude supplies.
Iraq Steps Up Oil Exports
Iraq is also increasing crude exports. Oil Minister Basim Mohammed said the country was exporting more than 3 million bpd and expected shipments through Turkey to rise above 600,000 bpd.
Ship-tracking data, however, indicate that Iraqi exports remain below levels seen before the conflict.
Provisional estimates from Vortexa put August crude exports at 2.3 million bpd, while Kpler estimated them at 2.17 million bpd. Both were higher than July levels but remained below February's pre-war figures of 3.7 million bpd and 3.362 million bpd, respectively.
US-Iran Diplomacy Eases Market Concerns
Oil prices also came under pressure as developments in New York raised hopes of a diplomatic path towards ending the nearly seven-month US-Iran conflict.
US President Donald Trump said his envoys Steve Witkoff and Jared Kushner had held productive discussions with mediators representing Iran, despite continuing to use strong rhetoric towards Tehran.
The prospect of negotiations has reduced some of the geopolitical risk premium that had built up in crude prices as the conflict disrupted major Middle Eastern supply routes.
US Inventories Rise
Higher US crude inventories added to the downward pressure on prices.
Industry data showed US crude stocks increased by 1.8 million barrels in the week ended September 18, against market expectations for a decline.
Official weekly inventory figures from the US Energy Information Administration were scheduled for release later on Wednesday.
The combination of recovering Gulf supplies, increased Iraqi exports, rising US inventories and tentative diplomatic progress has improved the near-term supply outlook after weeks of disruption in the global oil market.
(Reuters inputs)