Global crude oil markets remain highly volatile after a dramatic September rally pushed major benchmarks toward and, at times, above the psychologically important $100-per-barrel level, with traders rapidly repricing the risk of supply disruptions across the Middle East. Earlier this month, escalating attacks on shipping and concerns about crude flows through the Strait of Hormuz drove both Brent and U.S. West Texas Intermediate above $100; on September 10, Brent settled at $107.63 and WTI at $102.48. The market has since reversed sharply. On September 23, Brent was trading around $99.41 a barrel while WTI was near $90.02, leaving prices close to two-week lows rather than showing WTI at the $99.76 level displayed in the image. Improving supply expectations have contributed to the retreat: Saudi Arabia resumed operations on its East-West Pipeline, which allows crude to reach the Red Sea while bypassing the Strait of Hormuz, and Iraq has also been increasing exports. At the same time, indications of possible diplomatic progress involving the United States and Iran have reduced some of the geopolitical risk premium embedded in crude prices. Nevertheless, substantial uncertainty remains because Middle East developments can quickly alter expectations for global energy supplies, while refined products such as diesel and jet fuel remain tight. U.S. inventory trends are another important variable, with industry data indicating a 1.8-million-barrel increase in crude inventories for the week ended September 18. For businesses and consumers, sustained high oil prices can feed through to transportation, manufacturing and fuel costs and potentially complicate the inflation outlook. The key question for energy markets is now whether improving supply routes and diplomatic efforts can produce a lasting decline in crude prices or whether another geopolitical disruption will send the market sharply higher again.
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