Oil heads for two-month low as Middle East output rises

Dubai: Oil prices are headed towards a two-month low on Thursday as Middle East production climbed and hostilities between Iran and the US stayed muted.

Brent futures for January settlement dropped 1.54 per cent to $91.22 a barrel at 12:28 p.m. in Singapore. West Texas Intermediate for December delivery slipped 1.5 per cent to $85.26. Brent had gained 1.4 per cent on Wednesday.

The global benchmark is still up more than 50% this year. November has brought a sharp reversal. Gulf flows are recovering, and traders hope the Democrats’ midterm victory will hasten an end to the Iran conflict, now in its ninth month. 

Saudi Arabia, the world’s largest crude exporter, told OPEC its output jumped 26 per cent in October. That marks one of the highest monthly levels in years. Iraq reported a new wartime production high. The extra barrels are reaching physical markets while consumption stays constrained. Price differentials have weakened, and some signs of a surplus are emerging.

Middle East exports now sit near pre-war levels. Exporters got there without secure shipping lanes and finding alternate routes. Saudi Arabia started routing crude through its East-West pipeline to the Red Sea, bypassing the Strait of Hormuz. A shuttle trade built on ship-to-ship transfers helped in filling the gaps. Meanwhile, Iranian attacks on tankers continue.

Diplomacy has produced little. Mohsen Rezaee, secretary of Iran’s Supreme National Security Council, told Al Mayadeen that Iran will not remove any enriched nuclear material from the country. Washington has listed that as a key condition for negotiations. The two sides also disagree on frozen assets and the US naval blockade.