Oil falls toward two-month low as Middle East production rises

Detailed summary

Brent for January settlement fell 1.6% to $91.27 a barrel at 12:28 p.m. in Singapore.

Oil fell toward a two-month low as Middle East production rose and hostilities between Iran and the US remained muted.

Brent traded near $91 a barrel after rising 1.4% on Wednesday, while West Texas Intermediate was around $85. The global benchmark is up more than 50% this year, but has reversed sharply in November on a recovery in flows from the Middle East and hopes that the Democrats’ victory in US midterm elections will hasten the end of the conflict with Iran, which is now in its ninth month.

Saudi Arabia, the world’s largest crude exporter, told OPEC its production swelled 26% in October to one of the highest monthly levels in years. Iraq also said it bolstered output to a new war-time high.

Still, there’s been little indication of progress toward ending the conflict. Iran won’t remove “a single atom” of enriched nuclear material from the country, Secretary of the Supreme National Security Council Mohsen Rezaee said in an interview with Al Mayadeen. That’s one of the key US conditions for negotiations.

The increase in production illustrates the success of the Saudis and other Middle East exporters in restoring flows despite the unresolved conflict and a wave of Iranian attacks on tankers. The tide of oil is showing up in physical markets at a time when consumption remains constrained, weakening price differentials and creating some signs of a surplus.

While Middle East crude flows are near pre-war levels, they remain reliant on workarounds such as Saudi Arabia’s East-West pipeline to the Red Sea to bypass the Strait of Hormuz and the so-called shuttle trade using ship-to-ship transfers. Diplomatic efforts continue, but Washington and Tehran still disagree on key issues such as Iran’s nuclear program, frozen assets and the US naval blockade.

“Supply is recovering, but it relies on workarounds rather than secure shipping lanes, so disruption risk remains,” ANZ Group Holdings analysts Brian Martin and Daniel Hynes said in a note.

In Europe, Russian refineries were hit…

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