Oil is climbing again on Tuesday, and this time the missing piece is diplomacy. WTI traded at $103.57 a barrel in early European hours, up 2.2% from Monday's settlement of $101.39. Brent changed hands at $107.81 after spiking to $109.44 during Monday's session.
The meeting that never happened
Iran's foreign minister, Abbas Araghchi, had planned to be in Salalah on Monday to walk Gulf ministers and Iraq through a temporary shipping lane for the Strait of Hormuz, a plan Tehran drew up with Oman. It did not happen. On Sunday, Oman's foreign minister, Badr al-Busaidi, wrote on X that the gathering had been pushed back "in the interest of consensus." Oman's state news agency said the goal was to create conditions for "a constructive dialogue."
Iranian officials told state media that "some regional countries" had asked for the delay. Mohammad Ali Bak, who runs Gulf affairs at Iran's foreign ministry, told IRNA that Tehran and Muscat would agree a new date together. None has been announced.
Iran's own terms for a full reopening, laid out in August, are steep: an end to the US naval blockade, relief from sanctions, the return of frozen assets and compensation. President Trump said last week he is not pursuing a deal. The United States was never on the Salalah guest list.
All this followed a week in which US forces sank five Iranian tankers and two more ships were hit near Qeshm Island on Saturday. Friday's dip in prices had been built on hopes for the meeting. It lasted less than 48 hours.
Saudi Arabia's clock is ticking
The kingdom's East-West pipeline, hit by drones launched from Iraq on Thursday, is still down. Reuters puts the volume it had been moving to Yanbu, on the Red Sea coast, at about 4 million barrels a day, close to 4% of global supply. Three industry sources told the agency that Yanbu's tanks could keep tankers loading for five to seven days. That was Sunday. Repair estimates range from a partial restart soon to five or six weeks of work, and Riyadh has not said which it expects.
"Should such an important pipeline disruption persist, markets will be forced to reprice crude much higher," said Ahmad Assiri, research strategist at Pepperstone.
China pays up
The hunt for replacement barrels is visible in Shanghai. Crude futures on the Shanghai International Energy Exchange climbed to 929.4 yuan a barrel on Tuesday, roughly $138.50, a price the contract had never reached since it began trading in 2018, Bloomberg reported. Chinese refiners are stepping up purchases to plug the gap left by Gulf supply.
The direct hit to China is small, according to Emma Li, lead China oil market analyst at Vortexa. "The impact on China is largely indirect, as Chinese refiners have stopped loading Saudi crude from the Red Sea since August," she said. The knock-on effect is the problem. Refiners in India and Europe that counted on Yanbu cargoes must now outbid China for the same Atlantic Basin barrels, and the freight bill on those voyages is steep.
Gas joins the rally
Europe's benchmark gas contract rose 6% at Monday's open to 84.28 euros a megawatt-hour, a level last seen during the 2022-23 energy crisis. Qatari LNG remains curtailed and European storage is below the seasonal norm with winter eight weeks away.
The Fed meets today
The Federal Reserve opens a two-day meeting on Tuesday with oil above $100 and inflation well above target. By Monday, CME's FedWatch tool showed traders pricing a quarter-point increase at 90.7%. Economists agree: 85% of those polled by Reuters expect a hike. The decision lands at 2 p.m. Eastern on Wednesday.
Waleed Said, technical analyst at GivTrade, said the supply threats keep "an unusually large geopolitical premium embedded in crude prices" and explain why oil holds above $100 even as tighter policy weighs on demand. The market that was already short of barrels last week is shorter now.
What to watch
- Any Saudi statement on pipeline repairs, and whether Yanbu loadings slow before the weekend
- A new date for the Salalah meeting
- Wednesday's Fed decision and the chair's press conference
- The EIA weekly inventory report, also Wednesday