Oil prices drifted lower on Wednesday as Saudi Arabia began restoring crude supply on a critical pipeline to the Red Sea and on hopes for a diplomatic solution to the US-Iran war through talks at the UN in New York.

Brent crude futures fell 7 cents, or 0.07%, to $99.18 a barrel as of 0119 GMT while West Texas Intermediate futures fell 35 cents, or 0.39%, to $90.17 per barrel.

While US President Donald Trump warned on Tuesday that he could “annihilate” Iran, he also said his envoys Steve Witkoff and Jared Kushner had held productive talks with mediators of Iran to end the war.

“I think there’s a lot of momentum for them to make a deal,” Trump said.

Optimism around improved supply and a push to end the nearly seven-month conflict drove benchmark Brent down to close below $100 a barrel on Tuesday for the first time since September 8.

“The market is currently feeling more constructive about the global oil supply picture than it was a few weeks ago,” said Tim Waterer, chief analyst at KCM Trade.
“The meeting of US and Iranian delegations in New York has given traders a glimmer of hope … Despite the continued tough rhetoric, including threats of ‘annihilation,’ the market is choosing to price in the possibility of talks.”On Tuesday, Saudi Arabia restarted operations on its East-West Pipeline to the Red Sea, three sources briefed on the matter said, with signs of an increase in Middle Eastern oil flows.

Drone attacks, which Saudi Arabia has blamed on Iraqi militia, forced the kingdom to shut the pipeline on September 11, halting crude loadings at the kingdom’s Yanbu port.

Since the US-Israeli war on Iran disrupted oil flows from Saudi Arabia and its Gulf neighbours through the Strait of Hormuz, Riyadh has been using the pipeline to reroute around 4 million barrels per day – around 4% of global supply – to Yanbu.

Iraq, too, is increasing oil exports, its oil minister, Basim Mohammed, said on Tuesday. The country is exporting more than 3 million bpd, he said, and expects to boost exports via Turkey to more than 600,000 bpd.

Provisional data from shiptracking firms Vortexa and Kpler pegged Iraqi crude exports in August at 2.3 million and 2.17 million bpd, respectively, up from July’s level but below February’s pre-war level of 3.7 million and 3.362 million bpd.

Adding to downward pressure on oil prices, industry data showed US crude inventories rose by 1.8 million barrels in the week to September 18, while analysts polled by Reuters had expected a decline.

Official weekly inventory figures from the US Energy Information Administration are due at 10:30 a.m. ET (1430 GMT).

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Asian stocks rose after a rally in chipmakers drove the Nasdaq 100 Index to its first record since June, while falling oil prices added support as diplomatic efforts to end the war with Iran progressed.

MSCI’s Asia Pacific equity index climbed 0.3%, a sixth straight day of gains, with Japanese markets closed for a holiday. Bellwether chip stocks such as Samsung Electronics Co. and SK Hynix Inc. climbed.

Earlier, Shopify Inc. jumped 7.1% after striking a partnership with Meta Platforms Inc. for its new Muse AI agent. Concerns about how AI would erode margins and fees at financial brokerages spurred a selloff in US financial stocks and dragged other key equity indexes.

Read more: Stocks in news: Adani Group, OMCs, Persistent Systems and IRB Infra

Elsewhere, Brent fell as much as 1% before paring its losses to trade around $99.10 a barrel as President Donald Trump said US officials had a “very good” meeting with Iranian envoys as Washington renewed efforts to end the conflict. Gold and a Bloomberg gauge of the dollar held their gains from the previous session. There will be no cash trading in Treasuries due to the Japan holiday.

Technology stocks are reasserting their leadership in global markets, with chipmakers again emerging as a key source of gains. With the economic data calendar thin this week, further advances may hinge on whether diplomacy can push oil prices lower and ease pressure on bond yields. Investors are also looking to the summit between Trump and China’s Xi Jinping for signs of progress on trade and other economic disputes.
“Focus will stay on geopolitics, and if there’s any confirmation of progress towards a ceasefire between the US and Iran, look for oil and yields to fall further and for stocks to rally,” said Tom Essaye at The Sevens Report.Chipmakers surged at the start of the week amid early signs of success for Meta’s AI agent. Still, shares in several Asian consumer-facing industries, including major banks, insurers and online travel stocks, may come under pressure, after fears that Meta’s Muse may upset businesses relying on so-called consumer inertia.

Consumer inertia is the tendency to keep buying something out of habit even when better alternatives exist.

“For now, semiconductors and memory remain at the center of the equity conversation,” Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note.

Crude oil remains another key focus area for markets as Saudi Arabia moved to restart a key pipeline and the US flagged progress in talks with Iran to end a war that’s rocked supplies from the Middle East.

Investors are also parsing commentary from Federal Reserve officials for clues on the rate path after last week’s quarter-point hike.

Richmond Fed President Tom Barkin warned inflationary shocks could take time to fade, while Boston’s Susan Collins backed the increase and St. Louis Fed President Alberto Musalem said further hikes may be needed.

“Central banks face a potentially difficult trade-off: The fight against inflation has in many countries not yet been won, and policy rates that are too low risk unanchoring inflation expectations and pushing long-term yields higher,” Daniel Bergvall, head of economic forecasting at Skandinaviska Enskilda Banken AB, wrote in a report.

Jaguar Land Rover expanded an existing recall to include an additional 23,677 vehicles over an electronic system error that may lead to the loss of drive power and exterior lighting, according to federal regulators.

About 23,677 vehicles are affected by the recall, including 2021-2024 Land Rover Range Rover Velar, 2019-2024 Land Rover Range Rover Sport, 2020-2024 Land Rover Range Rover Evoque, 2020-2024 Land Rover Range Rover, 2021-2024 Jaguar F-Pace, 2021-2024 Jaguar E-Pace, 2020-2024 Land Rover Discovery Sport, 2021-2024 Land Rover Discovery and 2020-2024 Land Rover Defender models.

The recall was initiated because a DC-DC converter may malfunction due to an electrical overload that can happen during high power demand, the National Highway Traffic Safety Administration (NHTSA) said in its recall notice.

VOLKSWAGEN RECALLS 208,000 SUVS OVER BOLTS THAT COULD CAUSE STEERING LOSS

A software error can also cause the converter to stop functioning at vehicle start-up, which may result in the loss of drive power and exterior lighting.

“Failure of the DC-DC converter will result in the loss of 12-Volt system charging and can lead to complete loss of drive power and exterior lighting,” the notice reads.

Jaguar Land Rover estimates that all the listed vehicles are affected by the defect.

FORD RECALLS MORE THAN 223,000 VEHICLES OVER FUEL TANK ISSUE

The affected vehicles use a high-voltage battery system alongside a conventional 12-volt battery that powers systems such as lighting and electronic accessories. The DC-DC converter charges the 12-volt battery from the high-voltage system.

The lithium-ion battery is charged at a charging station, and the lead battery is charged with power from the lithium-ion battery, according to Panasonic. As the lithium-ion battery is charging, a DC-DC converter converts high-voltage DC power into low-voltage DC power.

Jaguar Land Rover has received 393 claims and field reports about the issue in the U.S., according to the NHTSA.

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No accidents, injuries or fires have been reported.

Dealerships will update the vehicle software at no cost. The update will introduce a new “limp-home” mode, providing a warning to the driver in case the DC-DC converter goes offline.

Interim letters notifying owners of the safety risk are expected to be mailed on Nov. 13. Additional letters will be sent out once the final remedy is available. 

Mumbai: The weighted average call rate (WACR) inched above the repo rate for the first time in nearly two months as liquidity drained from the banking system, reducing below the ₹5-lakh crore mark. WACR stood at 5.31% on Tuesday, up from 5.24% on Monday, CCIL data showed. Banking system liquidity was at a surplus ₹4.91 crores on Monday, after reaching a multi year peak of ₹11.16 lakh crore earlier this month.

The Reserve Bank of India has conducted multiple operations – durable and transient – to drain excess liquidity, including open market operation (OMO) sales and variable rate reverse repo (VRRR) auctions. Additionally, GST outflows and weekly g-sec auctions have also helped drain the excess.

Read more: Sebi to address concerns over settlement price for derivatives on expiry days, says chief Tuhin Kanta Pandey

“I think the RBI will be comfortable with a surplus of ₹3-4 lakh crore, because they also have to maintain liquidity to 1% of NDTL. Plus, we are also approaching the quarter end, where demand for funds is typically high, which is showing up in call rates,” said AN Vinod, head of treasury, South Indian Bank. The RBI will conduct one more ₹25,000 crore OMO operation on Monday, while the government will sell ₹32,000 crore 10 year bond on Friday, draining further liquidity.

“I expect liquidity to increase a little by month end, because government expenditure will come in, which can take system liquidity to around ₹5 lakh crore,” said Gaura Sengupta, chief economist at IDFC First Bank.

Read more: Ahead of Market: 10 things that will decide stock market action on Wednesday
“Its not that the Reserve Bank of India needs to hit a certain level of liquidity to manage the WACR. I think the VRRR manages the call rate well because even though the VRRR is temporary, the Reserve Bank of India keeps rolling it over,” Sengupta said.

The RBI drained ₹71,971 crore via a VRRR auction on Tuesday, where the notified amount stood at ₹75,000 crore. The central bank will conduct another VRRR for ₹75,000 crore on Wednesday.

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of ETG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.