【TMGM Financial Recap】Four Major Positive Factors Drove Oil Prices Down Overnight: Futures Fell 3%, Spot Prices Still Stuck At $120

At the close of New York on September 29, WTI fell 3.48% to $89.38, and Brent dropped 2.56% to $102.59. Four news reports were almost simultaneously driving prices down. On the supply side, the Saudi East-West pipeline was closed after a drone attack on September 10. Now, transport volume has recovered by about half, about 3.5 million barrels per day, close to 4 million barrels before the attack, and the Red Sea port of Yanbu has resumed tanker loading. On the reserve side, the U.S. Department of Energy announced a "swap" to release up to 40 million barrels from the strategic reserve, part of the 172 million barrel lending plan announced in March and the International Energy Agency's coordination of 400 million barrels released by 30 countries. On the diplomatic side, Trump confirmed on the 28th that the U.S. and Iran were conducting indirect talks, with Qatar and other mediators still transmitting information. The fourth clause is farthest from oil prices but carries significant weight: media reports say Trump supports releasing political prisoners in exchange for easing sanctions on Russia, which, if implemented, would ease restrictions on Russian oil exports.

Futures Are Falling, But Spot Prices Haven't Moved

But there was one odd spot on the market: futures were falling, while spot prices barely moved: spot Brent prices still held around $120, about $15 to $20 higher than futures, marking the largest spot premium outside 2022. This price difference is very direct: refineries are demanding oil now, and crude oil that can be loaded in the Gulf this month remains scarce; Futures traders are betting on easing conditions by year-end. Physical inventories are also confirmed to be tight. According to the International Energy Agency, global crude oil inventories have cumulatively dropped by about 500 million barrels since February

Kpler data shows that Middle Eastern crude oil exports rebounded to 16.328 million barrels per day in September, the highest since the war broke out at the end of February. Yet even so, Brent rose about 13% in September, with the war risk premium firmly embedded in prices. There are precedents for the reality of holding the reserve card: the US also lent out its last 40 million barrels in June, but companies were only willing to borrow about 500,000 barrels.

The restoration of supply itself is changing the negotiation landscape. The more oil flows out of the Middle East, the less bargaining chips Iran has in negotiations. This is a double-edged sword. CIBC energy trader Rebecca Babin pointed out that increased Hormuz traffic combined with pipeline restarts do provide relief, but "reduced leverage in Hormuz may push Iran to the negotiating table or escalate actions to regain the initiative." The latter possibility is being fulfilled: on Monday, Iranian drones attacked a super-large oil tanker in the Strait of Hormuz, seen as a signal to resume attacks on transit ships after last week's UN diplomatic breakdown; Iranian Speaker Ghalibabf reiterated on the same day, "If our security is not guaranteed, no infrastructure will be secure."

What Truly Keeps The White House Awake Is Diesel

While crude oil is falling, the political pressure in the U.S. is not on crude oil. Last week, U.S. diesel retail prices rose to $6.50 per gallon, setting a new record; diesel inventories were about 12% lower than the same period over five years, leaving almost no buffer. Because of this, diesel futures bucked the trend and rose about 2.5% during Tuesday's decline.

The White House's policy mix revolves around diesel: urging the EU to use emergency diesel inventories and accusing some member states of not releasing sufficient reserves; while also considering easing the sale of red-dyed diesel as a main alternative to the previously heated diesel export ban. The ban is being rolled out, but alternatives are being promoted, with the approach shifting from "banning sales" to "finding ways to lower prices."