Four positive factors converged, causing international oil prices to fall.

On Tuesday, September 29, WTI crude oil futures fell by more than 3% in a single day, breaking below the $90 mark again; Brent futures also declined.

The decline was driven by four positive signals that occurred almost simultaneously: Qatar announced that negotiations between Iran and the United States were still progressing, Saudi Arabia resumed oil transport on a key pipeline, the IEA stated that it was prepared to release reserves, and the Trump administration reportedly was considering a new plan to ease tensions with Russia.

However, in stark contrast to the sharp decline in the futures market, Brent spot prices remained at $120, indicating that the tight physical supply had not eased. While the WTI cash-futures spread narrowed somewhat, it remained at an extreme level. This divergence suggests that the fundamental tightness in physical supply has not changed despite the aforementioned positive factors.

Four positive signals released

First, Qatar announced that negotiations are still ongoing.

Qatari Foreign Ministry spokesman Majed al-Ansari said on Tuesday that Qatar and other mediators are still exchanging messages between Iran and the United States, and that multiple parties are exchanging possible solutions. According to Xinhua News Agency on the same day, Trump confirmed to the media at the White House on the 28th that indirect talks between the US and Iran had been held, and that negotiators from both sides had exchanged information through mediators.

Second, Saudi Arabia's East-West pipeline has restored about half of its oil transport capacity.

This pipeline is a crucial alternative route around the Strait of Hormuz. Its partial restoration, following damage from a drone attack, has a direct impact on global supply chains.

"Increased traffic in the Strait of Hormuz, coupled with the restart of Saudi Arabia's East-West pipeline, is providing some relief to the market," said Rebecca Babin, senior energy trader at CIBC Private Wealth Group.

She also pointed out: "The question is what this means for Iran—the reduction of Hormuz's bargaining chips may make Iran more willing to sit down at the negotiating table, or it may prompt it to escalate its actions to regain the initiative."

Third, the IEA stated that it is "prepared to act," and the United States plans to release the SPR.

The International Energy Agency (IEA) stated its readiness to release more strategic reserves into the market. The U.S. Department of Energy announced it will release up to 40 million barrels of crude oil from its Strategic Petroleum Reserve (SPR).

Fourth, Trump reportedly supports easing sanctions against Russia.

Russia is a major global oil producer. Reports indicate that the Trump administration is considering a new plan to ease tensions with Russia. According to media reports citing US Special Envoy John Coale, Trump supports a proposal to release political prisoners in exchange for easing sanctions against Russia.

The Iranian threat has not dissipated.

Despite positive news dominating market sentiment, geopolitical risks have not subsided.

On Monday, Iran reportedly attacked a supertanker in the Strait of Hormuz, a move seen as a signal that Iran is resuming its attacks on transit vessels after UN diplomatic negotiations broke down last week.

Iranian Parliament Speaker Bagher Ghalibaf reiterated on Tuesday: "The United States should know that in areas where we cannot sell oil, no one can sell oil." He then added: "If our security is not guaranteed, no infrastructure will be secure."

Iranian state news agency Fars later reported that another drone was launched at an "illegal" vessel that day, but details were limited.

Markets are divided on the prospects of the negotiations.

Goldman Sachs analyst Rich Privorotsky is cautiously optimistic about the progress of the negotiations.

He stated, "Reading these signals, it feels like the two sides are gradually getting closer. Axios and CNN have both reported on the US's openness to making specific nuclear concessions in exchange for the lifting of sanctions and the freezing of funds... Trump subsequently denied ever making any conditions to Iran."

This seems to me more like a tentative signal than noise. The mediators are still busy, and Trump has indicated he expects further negotiations this week. The incentives still point to reaching an agreement now… but the risk of miscalculation remains enormous.

Bloomberg analyst Frank Monkam points out that as we enter October, Iran may face greater negotiating pressure—once the US midterm elections are over, the leverage brought by the supply crisis may fade, and Iran's negotiating leverage will be weakened.

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