On Tuesday, September 29, WTI crude oil futures fell more than 3% in a single day, dropping back below the $90 mark; Brent futures also declined in tandem.
The decline was driven by four positive signals that landed almost simultaneously: Qatar announced that Iran-U.S. negotiations are still ongoing, Saudi Arabia's key pipeline resumed oil transportation, the IEA stated it is prepared to release reserves, and the Trump administration is reportedly drafting a new plan to promote easing relations with Russia.
However, in sharp contrast to the futures market selloff, Brent spot quotations remain at $120, and physical supply tightness has not eased. Although the WTI cash-futures spread has narrowed somewhat, it remains at extreme levels. This divergence indicates that the fundamental picture of tight physical supply has not been fundamentally changed by the above positive developments.
Four Positive Signals Released
First, Qatar announced that negotiations are still underway.
Qatar's Foreign Ministry spokesperson Majed al-Ansari said on Tuesday that Qatar and other mediators are still conveying messages between Iran and the United States, and multiple parties are exchanging possible solutions. According to a Xinhua News Agency report that day, Trump confirmed to the media at the White House on the 28th that the U.S. and Iran held indirect talks, and negotiators from both sides have exchanged information through mediators.
Second, Saudi Arabia's East-West pipeline restored about half of its oil transportation capacity.
This pipeline is a key alternative route bypassing the Strait of Hormuz. After previously being damaged by a drone attack, this partial restoration provides direct relief to global supply.
Rebecca Babin, senior energy trader at CIBC Private Wealth Group, said: "Increased flows through the Strait of Hormuz, combined with the restart of Saudi Arabia's East-West pipeline, are bringing some supply relief to the market."
She also noted: "The question is what this means for Iran — reduced leverage over Hormuz may make Iran more willing to come to the negotiating table, or it may prompt it to escalate actions to regain the initiative."
Third, the IEA stated it is "ready to act," and the U.S. plans to release SPR reserves.
The International Energy Agency said it is prepared to release more strategic reserves to the market. The U.S. Department of Energy announced it will release up to another 40 million barrels of crude oil from the Strategic Petroleum Reserve (SPR).
Fourth, Trump reportedly supports easing sanctions on Russia.
Russia is a major global oil producer. Reports say the Trump administration is drafting a new plan to promote easing relations with Russia. According to media citing U.S. special envoy John Coale, Trump supports a plan to exchange the release of political prisoners for loosening sanctions on Russia.
Iran's Threats Have Not Disappeared
Although positive developments dominated market sentiment, geopolitical risks have not exited the stage.
On Monday of this week, Iran reportedly attacked a very large crude carrier in the Strait of Hormuz, seen as a signal that Iran resumed strikes on transit vessels after last week's breakdown in United Nations diplomatic negotiations.
Iranian Parliament Speaker Bagher Ghalibaf reiterated on Tuesday: "The United States should know that in areas where we cannot sell oil, no one can sell oil." He then added: "If our security is not guaranteed, no infrastructure will be safe."
Iran's official media, the Fars News Agency, subsequently reported that another drone fired at an "illegal" vessel that day, but details were limited.
The Market Is Divided on the Prospects for Negotiations
Goldman Sachs analyst Rich Privorotsky holds a cautiously optimistic view on the progress of negotiations.
He said: "Reading these signals, it feels like the two sides are moving closer bit by bit. Both Axios and CNN reported the United States' openness to exchanging concrete nuclear concessions for sanctions relief and frozen funds... Trump subsequently denied having proposed any conditions to Iran."
To me, this looks more like a tentative signal than noise. Mediators are still busy, and Trump said he expects further negotiations this week. Incentives still point to reaching a deal now... but the risk of miscalculation remains enormous.
Bloomberg analyst Frank Monkam pointed out that entering October, Iran may face greater negotiating pressure — once the U.S. midterm elections are over, the leverage brought by the supply crisis may fade, and Iran's negotiating leverage will be weakened.
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