- Qatar mediated US-Iran talks remained stalled, with President Trump denying reports that the US was prepared to ease sanctions on Iran in exchange for nuclear concessions, keeping uncertainty over a potential reopening of the Strait of Hormuz and the normalization of regional oil flows.
- Market grapevine indicates that Gulf oil exports have recovered to around 23.3 MBpd in the latest week, broadly in line with 2025 levels, while five-day average exports stood at around 20.5 MBpd, or nearly 89% of 2025 levels. Meanwhile, Saudi Arabia has resumed tanker loadings from Yanbu following the restart of its East-West Pipeline.
- OPEC+ is expected to keep its Nov’26 production targets unchanged at its upcoming meeting, with the output rising by 0.63 MBpd MoM to around 25.0 MBpd in Aug’26, although it remained about 5 MBpd below the Feb’26 pre-war level. Meanwhile, the group continues to maintain roughly 2 MBpd of production cuts through the end of 2026.
- Saudi Arabia’s East-West Pipeline restart is gradually restoring crude export capacity, with current throughput to Yanbu at approximately 2–2.65 MBpd and expected to increase to 3–4 MBpd, although it remains below the pre-attack level of around 5.5 MBpd.
- Middle East crude exports rose to 16.328 Mbpd in Sep’26, the highest since the war began in late Feb’26, with Saudi Arabia’s exports rebounding to about 5.4 Mbpd from 2.446 Mbpd in Aug’26 as Strait of Hormuz flows recovered to around 9.719 Mbpd.
- US crude production reached a record 13.955 MBpd in the week ended 25th Sep’26 as producers increased output amid strong global crude demand and supply disruptions elsewhere.
- US crude inventories increased by 0.922 mln bbl to 427.3 mln bbl in the week ended 25th Sep’26, versus expectations for a 0.264 mln bbl draw, while lower refinery activity led to declines of 1.7 mln bbl in gasoline stocks and 2.3 mln bbl in distillate stocks.
- The US government plans to loan up to 40 mln bbl of crude from the Strategic Petroleum Reserve as part of the wider 400 mln bbl IEA coordinated emergency release, while US SPR inventories remain below 284 mln bbl, their lowest level since 1982.
- Indian Oil Corp. secured 2 mln bbl of Iraq’s Basrah Medium crude for 22nd Oct’26–31st Oct’26 loading, as Indian refiners increasingly turn to Iraqi and other alternative grades to offset tighter Russian crude supplies and ongoing disruptions to Gulf oil flows.
- Chinese refiners have suspended oil product exports beyond Hong Kong and Macau until further notice, while PetroChina cancelled several Oct’26 gasoline and jet fuel cargoes to prioritize domestic fuel availability, this move could reduce refinery runs and crude demand if restrictions persist, while tightening refined product supplies across Asian markets.
War Impact on Crude Oil & Gasoil/Diesel Prices
War Impact on Gasoline, ATF & Natural Gas Prices
GCC Bypass Pipelines Running Near Capacity — But Shah Gas Field Ablaze and Fujairah Zone Struck
- Saudi Arabia's East-West pipeline is pumping oil at its full capacity of 7 MBpd, bypassing the Strait of Hormuz. Crude oil exports from Yanbu port have reached 5 MBpd, and the country is also exporting 0.70 to 0.90 MBpd of oil products.
- Of approximately 15 MBpd of crude transiting the Strait of Hormuz in OND'25, combined SPR releases and bypass pipeline capacity can offset roughly two-thirds — or slightly more — for the next 20 to 30 days, providing the Trump administration a window to assess strategic direction.
- New strikes directly threaten this buffer — Iranian drones struck the UAE's Shah gas field (currently ablaze) and the Fujairah Oil Industry Zone on Mar 17. A tanker was also hit near the Strait of Hormuz. Saudi Arabia intercepted over a dozen drones; Kuwait and Bahrain sustained additional attacks. These represent the first direct strikes on GCC energy export infrastructure since the conflict began.
War Scenarios Point to Global Supply Deficit of 0.92–1.07 MBpd in 2026 and AMJ Quarter Most Severe with a deficit of 4.10 MBpd.
Pre-war, global supply and demand were near-balanced with a modest surplus of +0.55 MBpd projected for 2026. Both conflict scenarios introduce significant supply deficits driven by Strait of Hormuz disruptions and impacts on Iraq and Kuwait crude production.
- Scenario 1 (Preferred): Ceasefire talks continue to progress positively, with tanker flows through the Strait of Hormuz gradually normalizing over the next 4–5 weeks. Supply recovers steadily, while demand improves at a slower pace and remains below pre-war expectations, resulting in a moderate market surplus.
- Scenario 2 (Alternate): The Strait of Hormuz normalizes over the next 4–5 weeks, supporting a gradual recovery in oil exports and supply. Demand rebounds more strongly than in Scenario 1, reducing the market surplus, although overall consumption remains below pre-war levels.
Geopolitical backdrop:
War Front: President Trump has indicated that US has rejected the latest peace deal. Fears of fresh attacks have risen amid breakdown in negotiations weighing on base metals. US President Donald Trump has rejected a news report claiming his administration offered Iran sanctions relief and access to frozen funds, calling the story a hoax on social media. Iranian Foreign Minister Abbas Araghchi says Tehran has held further indirect talks with the United States through Qatari mediators in New York, with Washington’s formal response expected by Tuesday.
The United States and China have agreed to reduce tariffs on $30 billion of goods and launch a dialogue on AI, both countries said following President Xi Jinping's visit to Washington. The tariff reductions would apply to US exports such as agricultural goods, wood and cosmetics, as well as US imports including small appliances, toys, decorations, a White House statement said on Friday.
Recently New York Fed President John Williams said there was “no urgency” to raise rates again. This reduced expectations of an immediate/October Fed hike: Saudi Arabia restarted flows through its East-West pipeline after repairs following drone attacks. September crude exports from Middle Eastern producers reached about 16.3 million barrels/day. The US offered to loan up to 40 million barrels from its Strategic Petroleum Reserve. This adds another potential source of crude supply and therefore put downward pressure on prices. These factors eased near-term supply concerns, reducing inflation pressure.
Steel:
- Steel supply chains remain largely insulated from the Middle East conflict.
- Moreover, HRC prices are up by 2.9% on a monthly basis due to raw material price surge and stronger demand from auto sector.
Base metals:
- LME 3M copper are down 2.2% on a weekly basis as mid autumn festival slowed China consumption. Further, rejection of peace deal by US and stronger dollar is weighing on metals. However, high premiums and supply disruptions will provide some support.
- Aluminum prices are down 1.1% due to gradual recovery from GCC and stronger dollar despite tensions in the middle east.
Precious metals:
- Stronger U.S. yields and weak industrial offtake are suppressing any upside momentum.
- Stronger US Dollar and geopolitical tensions are weighing on precious metal prices.
LPG Market Update
- For August 2026, Saudi Aramco Contract Prices (CPs) rebounded to USD 620/ton for propane and USD 640/ton for butane, compared with USD 580/ton and USD 600/ton, respectively, in July. This represents a 6.9% month-on-month increase in propane CPs and a 6.7% month-on-month increase in butane CPs.
- Sonatrach raised its August propane OSP by 4.2% m-o-m, from $518/ton to $540/ton, while the butane OSP was cut by 5.0%, from $600/ton to $570/ton.
- India’s commercial LPG prices eased further in August, with the 19 kg cylinder price in New Delhi declining by ₹192, from ₹2,930 in July to ₹2,738 as of 3 August 2026. Despite the recent correction, commercial LPG remains substantially above its pre-war level of ₹1,741/cylinder. In contrast, the 14.2 kg domestic LPG cylinder remained unchanged at ₹942, reflecting continued price stability for household consumers.