Oil prices climbed on Tuesday, with investors weighing the uncertain prospects of US-Iran ceasefire efforts while also assessing the impact of restored Middle Eastern crude supply and the restart of Saudi Arabia's East-West pipeline.
Front-month November Brent crude futures rose 1.4% to $106.72 per barrel, while West Texas Intermediate (WTI) gained 1.4% to $93.91 per barrel.
On Monday, both benchmarks gave back some gains after Saudi Arabia resumed loading from the Red Sea port of Yanbu via the East-West pipeline, a key export route that bypasses the Strait of Hormuz.
Reports indicated that President Trump rejected a seven-day ceasefire proposal from Iran. Under that proposal, Iran would reopen the Strait of Hormuz and resume nuclear talks in exchange for the United States lifting its blockade on Iranian ports.
Sally Auld, Chief Group Economist at National Australia Bank, said differences remain between the two sides, so whether a deal can be reached in the short term, and whether oil transportation through the Strait of Hormuz can more broadly return to normal, remains uncertain.
Before the Saudi East-West pipeline was shut down on September 10 due to damage from a drone attack, it was transporting about 4 million barrels per day. After repairs, the pipeline is currently carrying about 3.5 million barrels per day, according to reports.
The pipeline has a crude oil transport capacity of about 7 million barrels per day, of which about 2 million barrels are used for refineries, and it connects Saudi Arabia's eastern oil facilities with Yanbu.
Saudi Arabia has also increased its export volumes through Gulf terminals. According to Kpler data, loadings at Ras Tanura port have risen from about 1.5 million barrels per day in early September to about 6.5 million barrels per day.
More broadly, crude exports from Saudi Arabia, the United Arab Emirates and Iraq have recovered to nearly 13 million barrels per day, the highest level since the war broke out on February 28 and close to 80% of pre-war levels.
Hamad Hussain, Senior Economist at Capital Economics, said the key question is whether Saudi Arabia can sustain higher Gulf shipments as Yanbu exports recover. He said that if volumes on both routes can be maintained at high levels, Saudi exports could exceed levels seen before the pipeline attack and add more crude supply to the market.
However, the spot crude market remains tight. Johannes Rauball, an upstream analyst at Kpler, said in a report on Monday that the global oil market currently faces a supply deficit of about 1 million to 2 million barrels per day, with Middle Eastern supply losses particularly constraining medium and heavy crude grades.
He said that as supply of similar Middle Eastern crude grades tightens, refiners are increasingly turning to Latin America and other regions to find replacement crudes. The supply disruption has also added pressure to the tanker market.
Kpler said rerouting Saudi crude onto less efficient Gulf shipping routes has roughly doubled the number of vessels needed to transport the same volume of crude and pushed freight rates for very large crude carriers (VLCCs) and dirty tankers to record highs.
The company expects tightness in the freight market to persist and believes that the reopening of the Strait of Hormuz will be a gradual and uneven process.
According to US Energy Information Administration (EIA) data, before the conflict broke out, the Strait of Hormuz transported an average of 21.6 million barrels per day of crude and petroleum liquids in the fourth quarter of 2025, equivalent to about one-fifth of global petroleum liquids consumption. As the war severely disrupted shipping through one of the world's most important oil chokepoints, average daily volumes fell to 4.9 million barrels in the second quarter.
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