Oil Price Today (September 29): Crude oil rises to $107 as US-Iran deal stalemate ups supply fears. $120 in sight?

Oil prices rose for a second straight session on Tuesday, with concerns over potential supply disruptions from the Middle East due to the US-Iran conflict outweighing signs of a recovery in crude exports from the region.

US and Iranian officials separately held talks with mediators in a renewed attempt to end the seven-month war, officials from both countries said. Further discussions are widely expected to centre on an amended version of a seven-day proposal Iran presented last week on the sidelines of the United Nations General Assembly.

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Crude oil price on September 29

Brent crude futures were up $1.65, or 1.57%, at $107 a barrel, while US West Texas Intermediate crude rose $1.29, or 1.40%, to $94 a barrel.

Crude exports from major Middle Eastern producers rose to 12.8 million barrels a day in September, their highest level since February, preliminary data from data provider Kpler showed on Monday. The increase was driven by higher shipments from Saudi Arabia and the United Arab Emirates.

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The war, which began in late February with US and Israeli attacks on Iran, has put the Strait of Hormuz under close watch. The crucial shipping route handles oil and gas supplies, and disruptions there have shaken energy markets.

Meanwhile, the US is considering regulatory relief that would allow wider sales of red-dyed diesel in an effort to lower prices, people familiar with the discussions told Reuters. The move could allow some buyers to avoid federal fuel tax. The proposal has emerged after days of deliberations as a leading alternative to a diesel export ban.

Oil price outlook

The uncertainty has also made it harder for major banks to gauge the direction of oil prices. JPMorgan said it had lost visibility on the market and, for the first time since the Iran war began in February, no longer had a clear baseline scenario. The bank said the escalation in tensions was adding to concerns over an already worsening supply shock.

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"We simply don't know how to model the endgame," JPMorgan analysts said, pointing to the uncertainty over how the conflict could unfold. At the start of the conflict, the bank had assumed there were economic thresholds the US administration would not cross. Six months into the war, JPMorgan said many of those thresholds had been crossed, while there was still no clear exit strategy.

The prospect of further supply disruptions has also raised the potential for oil prices to climb higher. Daan Struyven, co-head of global commodities research at Goldman Sachs, said recent attacks showed that disruptions to shipping could spread and become more severe.

Goldman Sachs has outlined a scenario in which oil prices could reach as high as $120 a barrel if attacks on vessels in the Middle East intensify. If exports return to normal, the bank expects oil prices to move back towards $80 a barrel.

Read more: US, Iran hold separate talks with mediators as push to end seven-month war resumes

Struyven told Bloomberg that shipping risks had become a key driver of oil prices. Goldman Sachs sees "meaningful upside to crude oil prices" and also expects natural gas and refined product prices to rise. Struyven said supply shocks in gas and fuels are larger than those in the crude market.

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