LONDON, Sept 28 — Brent crude oil rebounded more than two per cent on Monday after United States (US) President Donald Trump rejected a peace deal from Iran to resolve their conflict and reopen the Strait of Hormuz.
Brent futures rose US$2.60, or 2.49 per cent, to US$106.92 a barrel at 0803 GMT, while U.S. West Texas Intermediate crude was at US$94.49 a barrel, up US$2.08 or 2.25 per cent.
"Oil prices appeared to have jumped on the back of President Trump rejecting Iran’s peace proposal," said Capital Economics' senior climate and commodities economist Hamad Hussain.
Last week, Tehran announced a peace proposal at the United Nations General Assembly in New York City, saying it had been transmitted to the Americans via Qatari mediators. On Saturday, Trump said that he rejected the plan, but told Axios in a phone interview on Sunday that he expected US negotiators to engage in more talks this week.
"While greater flows through the Strait of Hormuz are easing some of the upward pressure on prices, the bigger picture is that the oil market remains in a deficit," Hussain said.
Early on Saturday, Yemen's Saudi-led coalition said that it had intercepted two ballistic missiles and two drones launched by the Iran-backed Houthis towards the kingdom.
Meanwhile, preliminary data from Kpler on Monday showed that crude oil exports from key Middle East producers rebounded in September to 12.8 million barrels per day (bpd), as Saudi Arabia and the United Arab Emirates boosted exports.
The rebound followed a recovery in shipments via the Strait of Hormuz, which were set to hit about 7.4 million bpd this month, as Saudi Arabia diverted exports from the Red Sea port of Yanbu to its eastern Ras Tanura port after attacks damaged its East-West pipeline.
Brent edged up 0.4 per cent last week, but WTI fell more than seven per cent on concerns that the US may ban diesel exports to ease record prices, which could curb US refining output.
European low-sulphur gasoil's premium to Brent crude futures hit a record of about US$95 a barrel last week after Trump said he backed a diesel export ban to lower prices that have hit record highs amid a global supply shortage.
Goldman Sachs said that while Europe and especially Latin America, including Brazil and Mexico, are the key destinations for US diesel exports, a diesel tightening shock would likely quickly spread to the rest of the world, including Asia, as Latin America and Europe start pulling harder on remaining diesel barrels from countries such as India.
"We estimate that each week of a US diesel export ban would raise European wholesale diesel (ARA gasoil) prices by US$3/bbl, or just under two per cent," it added.
