Oil rises after Trump denies readiness to ease Iran sanctions

Brent crude is heading for a monthly gain of about 14%, its largest since July, while US crude is heading for a 4% increase after exceeding $106 for the first time since May.

The gap between the two benchmark crudes also widened this month to the largest in four months, as traders monitored potential US plans to restrict diesel exports, which could lead to an oversupply in the domestic market and make US refiners reduce crude processing.

Trump is considering allowing the sale of red-dyed diesel, instead of imposing an export ban, to ease some price pressure on consumers as the November midterm elections approach.

Sol Kavonik, head of energy research at MST Markit, said, "As more evidence emerges of a recovery in flows through the Strait of Hormuz, hopes will emerge for alternatives to restrict US diesel exports, and the lack of significant Iranian escalation over the past 24 hours has slightly reduced prices."

He added that the situation "remains volatile, and oil logistics costs are high and constrained."

Qatar said on Tuesday that it hopes diplomatic mediation efforts between Iran and the United States will lead to a breakthrough.

Qatari Foreign Ministry spokesman Majed Al-Ansari told journalists, "Work is still ongoing to hold meetings and deliver messages between the parties, and we are working to find common ground to reach an agreement that saves us all from the repercussions of the conflict."

However, Trump denied reports by Axios and CNN, citing unnamed US officials, that he was ready to ease sanctions on Iran and release frozen funds in exchange for "tangible" steps from Tehran on its nuclear program.

Trump wrote on his Truth Social platform, "This is not true. I have not offered them anything."

Saudi Arabia resumed loading oil tankers from the Yanbu port on the Red Sea on Tuesday after restarting the East-West pipeline.

Crude oil exports from Middle East producers in September reached 16.328 million barrels per day, the highest level since the start of the US-Israeli war with Iran in late February.

Market sources, citing data from the American Petroleum Institute, said on Tuesday that crude oil and gasoline stocks in the United States increased, while distillate stocks fell last week.

The sources said that crude oil stocks increased by 1.02 million barrels in the week ending September 25.

Official inventory data from the US Energy Information Administration is scheduled to be released at 10:30 AM Eastern Time (14:30 GMT). Analysts surveyed by Reuters expect crude oil and petroleum product inventories to have decreased.