Oil prices started the week with a decline in anticipation of negotiations

Continued exchange of blows between Yemen's Houthis and Saudi Arabia last week kept oil prices high, and only at the end of the week did they decline slightly on hopes of resuming talks with Iran and negotiations with the Houthis.

 

November Brent crude futures fell 1% to $104/barrel for the week (+13% for the month), although they rose to a 4-month high of $109/barrel during the week amid the suspension of oil exports from Saudi Arabia. On Monday, at the beginning of trading in Asia, quotes fell to $101.7/barrel in anticipation of a decrease in tensions in the Middle East.

 

Hopes for the resumption of oil supplies from the Middle East arose after Reuters reported that China had privately asked Iran to help deter Houthi militants in Yemen from attacking Saudi Arabia's energy facilities, which also announced the restoration of the East-West pipeline at about half its capacity, which also reduced pressure on quotes.

 

The US command continues to block seaborne oil exports from Iran and has already stopped 109 corals and tankers that were heading to/from Iran. At the same time, US Energy Secretary Wright reported that 18 million barrels of crude oil and petroleum products passed through the Strait of Hormuz on Tuesday alone, which reduced fears of a global supply shortage.

 

Over the weekend, Iran's foreign minister arrived in Qatar for talks, which is very important given that Iran has been heavily shelling its partner Qatar for the past six months and has practically stopped the export of oil and liquefied gas from Qatar. Qatari Foreign Ministry spokesman Majed Al-Ansari told Bloomberg that mediators are working with Tehran and Washington to resume talks, and the parties are exchanging a number of proposals to overcome differences.

 

Despite the projected decline in demand, the International Energy Agency (IEA) has raised its estimate of a global oil deficit this year to 1.7 million barrels per day from 1.3 million barrels per day (bpd) last month due to supply constraints caused by the conflict between the United States and Iran. The IEA noted that the restoration of a global oil surplus is not possible before 2027, while it was previously forecast at the end of 2026.

 

If supplies do not resume, the main crisis will come when countries begin to run out of strategic oil reserves, and the prices of petroleum products will soar even higher.

 

The blocking of traditional supply routes has already led to a significant increase in the cost of transporting oil. For example, the cost of transporting 2 million barrels of oil from West Africa to China has now reached $23.59/barrel, while in July it was about $6.5/barrel.

 

Fuel prices also continue to rise. For example, the average price of diesel in France is €2.38/l, while in the US it has reached a record level of $6.49/gallon or $1.71/liter, which is 100% higher than the minimum level recorded only 9 months ago in January.

 

Rising fuel prices mean that the supply crisis will be prolonged, so even a drop in oil prices will not lead to a rapid drop in prices at the gas station. This situation will maintain high demand for biofuels, so prices for grains and oilseeds will also remain high.