Oil gains on little sign of progress in US-Iran talks

By Enes Tunagur

LONDON, Sept 24 (Reuters) - Oil prices rose around 2% on Thursday as diplomatic talks between the US and Iran showed little sign of progress, while investors focused on uncertainty about a potential US ban on diesel exports.

Brent crude futures were up $2.03, or 2%, at $105.11 a barrel at 1320 GMT, while West Texas Intermediate futures were up $1.48, or 1.6%, at $93.64 a barrel. 

Brent rose to as high as $106.50 earlier in the day, following reports suggesting Iran gave the US one week to meet its publicly stated demands, such as lifting the US naval blockade.

Iran and the US remain divided over how to end their conflict, but diplomacy must continue, a senior Iranian official told Reuters on Wednesday, after Iran's president told the UN General Assembly that Tehran would never surrender to US pressure.  

The official said Tehran was reviewing Washington's response to its peace proposals, which prioritise lifting the US naval blockade on Iranian ports and reopening the Strait of Hormuz. 

European diesel futures came off all-time highs on Thursday amid uncertainty about a potential US ban on diesel exports. A White House official on Wednesday denied a report that said the US is preparing a 90-day ban of diesel exports.

A European Commission spokesperson said on Thursday that the EU was concerned about the reported US plans, as such a move would risk a negative impact on both sides.

Analysts and market watchers have warned a US diesel export ban would do little to ease high energy prices and could worsen global supplies and further disrupt economies.

The physical market for oil is nowhere near a fully normalised situation, said Priyanka Sachdeva, head of market insights at Phillip Nova. 

"Brent retains a larger geopolitical and sea-route premium because international crude is more directly exposed to Middle East and Hormuz disruption, while WTI benefits more from relatively insulated US supply," Sachdeva added.  

US distillate stockpiles, including diesel and heating oil, fell 428,000 barrels to 107.4 million barrels last week, Energy Information Administration data showed.

Meanwhile, US crude inventories rose 3 million barrels to 426.4 million barrels last week, though analysts polled by Reuters had expected a 641,000-barrel draw. [EIA/S]

(Reporting by Enes Tunagur in London and Jeslyn Lerh in Singapore. Additional reporting by Stephanie Kelly in London and Arathy Somasekhar in Houston. Editing by Mark Potter, Kirsten Donovan)