WTI maintains gains above $98.50 as Middle East supply risks linger

• A gain of over 10% in WTI this month reflects intensifying hostilities across the Middle East and Eastern Europe.
• Conflicting indications from US-Iran negotiations weighed on the market, as reports of an imminent agreement were dismissed.
• Middle Eastern oil flows returned to 80% of pre-war levels, even as the Strait of Hormuz recorded 18 attacks on vessels.

At around $98.60 in Wednesday’s Asian session, West Texas Intermediate (WTI) oil is recovering after two consecutive days of declines. The rise in crude prices came as traders weighed conflicting reports on progress in diplomacy between the United States and Iran.

High-level diplomatic meetings have brought headwinds for market momentum, although negotiations are continuing. In Tehran, Pakistan’s army chief, Field Marshal Asim Munir, held discussions with senior Iranian diplomatic and military officials on bilateral relations and the progress of talks with Washington. A diplomat involved in the discussions said efforts to bring the conflict to an end remained under way, but rejected reports suggesting a final agreement was imminent.

Mounting risks to global supplies have driven oil prices more than 10% higher this month, notwithstanding the uncertainty surrounding diplomacy. Geopolitical tensions have increased as hostilities involving Saudi Arabia, Iran-backed Houthi forces, Russia and Ukraine have intensified. At least 18 attacks on vessels in the Strait of Hormuz over the past two weeks have added to those tensions. Energy infrastructure has nevertheless proved resilient: oil flows from the Middle East have largely recovered to approximately 80% of pre-war levels.

Brent reaches a new multi-month high

Renewed strength in crude has drawn attention from strategists at Societe Generale, who note that Brent has “backed up to $111.2/b, highest since 20th May,” highlighting the oil market’s latest advance to multi-month highs.