Brent crude oil fell below $99; UBS: The negotiations themselves are no longer negligible, and oil prices may continue to face downward pressure in the short term.

Brent crude oil prices fell sharply this week as diplomatic talks between the US and Iran and expectations of a partial restart of Saudi oil pipelines boosted market sentiment, leading to a temporary easing of supply tensions.

Brent crude oil fell as low as $97.77 a barrel on Wednesday, a drop of nearly 11% from its high of $109.65 this month. Saudi Arabia indicated that the East-West oil pipeline is expected to partially resume flow within days, and exports from Yanbu port will also restart. Meanwhile, according to Xinhua News Agency and CCTV News, the US and Iran held three hours of talks during the UN General Assembly, with Trump describing the talks as "very successful."

UBS energy expert Dominic Ellis warned that the very fact that negotiations are underway is significant and is expected to continue to suppress oil prices in the short term. However, if a substantial breakthrough is achieved, Brent crude prices could quickly fall back to the $80 range.

The decline in oil prices eased slightly in the U.S., with the national average price of regular gasoline falling to $4.474 per gallon on Wednesday, according to AAA data. However, oil prices had surged 9.3% this month, and the current limited pullback has had little effect on the Trump administration's political relief efforts—oil prices remain well above the politically sensitive $4 per gallon mark.

The expected restart of the Saudi pipeline will alleviate near-end supply pressures.

Saudi Arabia announced that crude oil flow through the East-West pipeline is expected to partially resume in the coming days, and crude oil export loading at Yanbu port will also restart. Previously, some Asian buyers had already been arranged to resume cargo loading at Yanbu port, which has alleviated the tightness in the physical market to some extent.

According to local media reports, a full repair of the pipeline could take up to eight weeks. UBS's Dominic Ellis pointed out that even a partial restart would be enough to alleviate the most pressing supply bottleneck in the crude oil market. Brent crude has fallen nearly 11% since peaking in mid-month, with a weekly decline of approximately 3.8%.

US-Iran New York Talks: The Negotiations Themselves Constitute a Market Signal

According to CCTV News, on September 22 local time, Iranian Foreign Minister Araqchi and US President's Special Envoy Witkov met in New York on the sidelines of the 81st session of the United Nations General Assembly.

US President Donald Trump said that US officials held "very successful" talks with Iranian representatives on Tuesday during the UN General Assembly in New York. US Special Envoy Steve Witkoff and Jared Kushner attended the three-hour meeting. Witkoff said afterwards that he "feels very good" and posted on X platform that he hoped the talks "will prove to be constructive and promising."

Iran has also acknowledged that it has contacted the United States through an intermediary and stated that it has put forward conditions for the resumption of transit through the Strait of Hormuz, saying that if the relevant conditions are met, the resumption could be achieved within seven days at the earliest.

UBS: Downward pressure may persist, but the outlook for negotiations remains uncertain.

UBS's Dominic Ellis remained cautious about the prospects for negotiations in a client report. He noted that critics would point out that previous similar statements from the US had not yielded substantial diplomatic progress, and that the US had rejected Iran's precondition of immediately lifting the blockade—one of the prerequisites for Iran to restore passage through the Strait of Hormuz.

Nevertheless, Dominic Ellis emphasized that "the fact that negotiations are ongoing is a significant development, and this situation is likely to continue to exert downward pressure on oil prices until there are clear signs of a stall in progress." He also cautioned that if a breakthrough is achieved in the negotiations, Brent crude oil prices could quickly return to the $80 range.

UBS's baseline scenario suggests that the US government has a strong incentive to rely on carrots rather than sticks ahead of the November midterm elections. Trump's previous support for the US diesel export ban contrasts sharply with Interior Secretary Burgum's statement last week that the ban "may not achieve the desired effect," indicating growing anxiety in the White House about high domestic fuel prices. Dominic Ellis believes that advancing diplomacy with Iran may be the most convenient path for the Trump administration to lower oil and refined product prices in the short term.

However, in the medium term, UBS judges that the conditions proposed by Iran are unlikely to be accepted by the United States, "We would not be surprised if the situation returns to the low-intensity conflict seen in the past month."

The shadow of the refining crisis lingers, and political pressure has not subsided.

While the pullback in oil prices from triple-digit highs has provided some respite for pump prices, a report released Tuesday by Goldman Sachs energy analyst Nikhil Bhandari indicates that the global refining crisis will continue into 2027, putting sustained pressure on gasoline and diesel prices.

For the Trump administration, current oil prices are still well above the politically sensitive threshold of $4 per gallon. Whether diplomatic progress can be translated into a substantive agreement will be a key variable determining market trends and whether political pressure can be truly alleviated.

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