Oil prices rise for second session on continued Middle East supply concern

By Sumit Saha

Sept 29 (Reuters) - Oil prices rose for a second successive session on Tuesday as lingering concern over Middle East supply disruption brought about by US-Iran conflict outweighed signs of recovering crude exports from the region.

Brent crude futures had risen 63 cents, or 0.6%, to $105.91 a barrel by 0002 GMT while US West Texas Intermediate crude was at $93.32, up 72 cents, or 0.8%.

"A clearer picture is emerging of higher oil export volumes leaving the Gulf, but much of that increase still relies on workarounds such as ship-to-ship transfers. Those methods are less efficient and more costly than normal operations, which is why crude prices remain elevated," said KCM Trade chief analyst Tim Waterer.

Crude exports from major Middle Eastern producers climbed to 12.8 million barrels a day in September, the highest since February, preliminary figures from data provider Kpler showed on Monday, helped by increased shipments from Saudi Arabia and the United Arab Emirates.

US and Iranian officials spoke separately with mediators in a renewed effort to end seven months of war, officials of both countries said. Further talks are widely expected to focus on an amended version of a seven-day proposal that Iran presented last week on the sidelines of the United Nations General Assembly.

"That perennial hope of a deal is arguably the main factor preventing Brent from moving sustainably above $110 in the near term," Waterer said. There are competing forces, and traders are trying to separate the signal from the noise, he added.

The war, which began in late February with US and Israeli attacks on Iran, has focused attention on the Strait of Hormuz, a crucial shipping lane for oil and gas supplies, the disruption of which has upended energy markets.

Meanwhile, the US is considering regulatory relief to allow broader sales of red-dyed diesel to help lower prices, action that could allow some buyers to avoid federal fuel tax, people familiar with discussions told Reuters. The proposal emerged from days of deliberation as a leading alternative to a diesel export ban.

(Reporting by Sumit Saha in Bengaluru; Editing by Christopher Cushing)