Brent crude rose nearly 4%, with a strong statement from Iran helping to end a five-day losing streak, while rumors of a diesel export ban roiled the market.

Brent crude rose nearly 4%, with a strong statement from Iran helping to end a five-day losing streak, while rumors of a diesel export ban roiled the market.

International crude oil futures rebounded on Wednesday, reversing a five-day losing streak. The Iranian president's statement that he would never yield to the United States reignited geopolitical risk premiums, while rumors of a US diesel export ban triggered brief and sharp market volatility.

On Wednesday, October 23rd, during the midday trading session in the US, both WTI and Brent crude oil prices ended their five-day losing streaks and closed at two-week lows, reversing the losses they had reached on Tuesday. WTI November crude futures rose 1.81% to $92.16 per barrel, ending their longest losing streak since February 26th. Brent November crude futures rose 3.86%, marking their biggest daily gain since September 10th, closing at $103.08 per barrel.

Iranian President Pezechzian's tough stance at the UN General Assembly in New York was seen as a key catalyst for Wednesday's rise in oil prices. According to CCTV, Pezechzian stated that Iran would not surrender in a war against the US, but believed the conflict could be ended through diplomatic means. He also stated that Iran would not accept concessions through coercion, sanctions, or military threats. This was a direct response to US President Trump's warning at the UN General Assembly on Tuesday that he could "destroy" Iran.

Meanwhile, data released by the U.S. Energy Information Administration (EIA) on Wednesday showed that U.S. crude oil inventories unexpectedly increased by 3 million barrels last week, cooling earlier optimism about the return of Middle Eastern supplies. U.S. diesel futures also plunged by about 5% on the day due to reports of a possible U.S. diesel export ban, although the White House subsequently denied such plans.

Iranian leadership's statement reignites geopolitical risk premium

The recent rebound in oil prices stems directly from the strong signals released by Iran's top leadership.

Iranian President Peskov said in his address to the UN General Assembly on Wednesday that Iran believes in diplomacy and is willing to negotiate to end the conflict, but will never succumb to pressure from the United States. This statement echoed comments made on the same day by Rezaei, the Secretary of the Supreme National Security Council, a senior Iranian security official, who said the Strait of Hormuz would not reopen until Iran's conditions were met.

On Tuesday, Reuters, citing a senior Iranian official, reported that the Strait of Hormuz could reopen within seven days if the United States eases military pressure and lifts its blockade of Iranian ports. It is understood that the two sides held indirect consultations on Tuesday regarding the reopening of the strait and the lifting of the US maritime blockade.

U.S. Middle East envoy Witkov stated on social media that U.S. officials had lengthy contacts with the Iranian delegation through the mediators' channel during the UN General Assembly and expressed cautious optimism about the progress of the negotiations. However, U.S. Secretary of State Rubio stated on Wednesday that the talks between the U.S. and Iranian representatives during the General Assembly did not achieve any major breakthroughs.

In his speech at the UN General Assembly, Trump said he expects Iran to reach an agreement with the US after the US midterm elections in November, and said he faces a "major choice" of whether to push for reconciliation or further escalate the conflict.

Expectations of improved supply in the Middle East previously suppressed oil prices.

Prior to this rebound, Brent crude had fallen for five consecutive trading days, and WTI briefly touched its lowest level since September 1st in early trading on Wednesday. The main factor previously dragging down oil prices was market expectations of improved outflows of Middle Eastern crude oil.

Saudi Arabia reportedly resumed operations of its east-west pipeline to the Red Sea on Tuesday. The pipeline had been forced to shut down after a September 11 drone attack, halting crude oil loading and unloading at the port of Yanbu; Saudi Arabia blamed the attack on Iraqi militias. Meanwhile, Saudi Arabia also supplied Asian refiners with more crude oil from loading points outside the Strait of Hormuz on Tuesday.

Iraq's oil minister said on Tuesday that the country's current exports have exceeded 3 million barrels per day, and that exports via Turkish pipelines are expected to rise to more than 600,000 barrels per day.

Furthermore, US Secretary of State Marco Rubio stated on Wednesday, following a meeting with Russian Foreign Minister Sergey Lavrov, that both Ukraine and Russia had expressed interest in a limited ceasefire regarding food and energy-related objectives. Market participants are also beginning to focus on the meeting between the Chinese and US leaders. S&P Global Energy noted that Trump may use this opportunity to seek assistance in de-escalating the conflict with Iran and reopening Middle Eastern shipping routes.

Rumors of a diesel export ban trigger market turmoil

Another focus of the market on Wednesday was the potential U.S. diesel export ban. Politico reported that the Trump administration was drafting a 90-day diesel export ban plan. Following this news, U.S. ultra-low sulfur diesel futures initially plunged by about 5% during the session. The White House subsequently denied the report, and the decline narrowed, ultimately closing down 3.4% at $4.7764 per gallon, a stark contrast to the rise in EU diesel futures on Wednesday.

Data from the National Automobile Association (AAA) showed that the average retail diesel price in the United States was $6.5217 per gallon on Wednesday, slightly lower than the record high of $6.5276 set on Tuesday.

Analysts at S&P Global Energy's CERA division estimate that a complete ban on U.S. diesel exports could force U.S. refiners to cut crude oil processing by approximately 1.9 million barrels per day, or about 12% of refinery capacity. The U.S. currently has an average daily diesel surplus of about 1.4 million barrels, and its average daily exports this year have reached 1.5 million barrels, an increase of 275,000 barrels compared to the same period last year.

The agency warned that the move would cause "high disruption" to the Atlantic Basin fuel market, potentially creating a domestic diesel surplus while pushing up global diesel prices. Meanwhile, the sharp drop in refinery utilization could reduce U.S. gasoline production by up to 750,000 barrels per day, turning the country into a net gasoline importer in the fourth quarter.

U.S. Energy Secretary Wright said earlier Wednesday that a diesel export ban was not feasible. Treasury Secretary Bessant stated that the Trump administration was studying the feasibility of a full or partial restriction on exports.

A surprise surge in US crude oil inventories adds to market uncertainty.

Data released by the EIA on Wednesday showed that U.S. crude oil inventories rose by 3 million barrels to 426.4 million barrels in the week ending September 18, far from analysts' expectations, which had been for a decrease of 641,000 barrels.

This unexpected inventory buildup partially offset the upward pressure on oil prices from geopolitical tensions. However, inventories of refined oil products such as gasoline and distillate fuels declined, providing some support to the refined oil market.

Amidst the continued high degree of uncertainty, the trajectory of the Strait of Hormuz remains a key variable influencing the market. Significant differences persist between Iran and the United States, and whether diplomatic efforts can achieve a substantial breakthrough will be a major focus for investors.

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