Why Oil Rebounded After a Four-Day Slide

Oil prices turned modestly higher in early Asian trading on September 22, ending a four-session slide. The move was small: Brent for November delivery rose 74 cents, or about 0.75%, to $101 a barrel, while the expiring October WTI contract gained 41 cents to around $96. It followed a sharp prior-session fall in which Brent settled at $100.34, down 3.4%, and WTI settled at $95.78, down 4.5%. 1

The rebound did not signal that the market had resolved its underlying supply concerns. Instead, it reflected a fragile balance between optimism that U.S.–Iran diplomacy could reduce conflict risk and concern that Saudi export routes and regional shipping remained exposed.

Diplomacy hopes drove the preceding selloff

The four-day decline was driven largely by expectations that the United States and Iran might find a diplomatic opening at the UN General Assembly. President Donald Trump said he was open to meeting Iranian President Masoud Pezeshkian, who was expected in New York, while Iran had conveyed conditions for renewed negotiations through mediators.

For oil traders, even the prospect of talks matters because it can lower the premium embedded in prices for potential disruption to Middle Eastern production and transport. That was the market’s initial reaction: hopes of de-escalation, alongside signs that Saudi shipments were recovering, pushed Brent toward $100. 13

But there was no confirmed diplomatic breakthrough. The September 22 price rise suggested traders were reluctant to extend bearish positions while waiting for clearer signals from the UN meetings.

Saudi rerouting eased one risk but heightened another

Houthi attacks on Saudi Arabia’s East–West pipeline disrupted a major export route and prompted Saudi Aramco to shift more crude toward Gulf terminals and the Strait of Hormuz. Satellite data cited by JPMorgan showed Saudi oil moving through Hormuz averaged about 2.9 million barrels per day over the prior six days, compared with roughly 700,000 barrels per day in August. 2

That increase demonstrated that Saudi Arabia could move significant volumes despite the pipeline disruption, easing fears of an immediate, complete loss of exports. Satellite imagery also showed supertankers with combined capacity of about 14 million barrels at Saudi Gulf loading terminals. 1214

However, this workaround concentrated more Saudi supply in the Strait of Hormuz. The market therefore faced two opposing implications:

• More Saudi Gulf loadings supported the view that export volumes could recover.
• Greater reliance on Hormuz increased exposure to a waterway where shipping disruption remained a central risk.

That tension helps explain why prices could fall sharply on diplomatic optimism yet rebound quickly when traders reassessed the remaining geopolitical exposure.

Why the rebound was described as short-covering

KCM Trade chief market analyst Tim Waterer characterized the early rise as a typical short-covering bounce rather than a fundamental shift in oil-market conditions. In practical terms, traders who had positioned for further declines bought contracts back after the rapid four-day fall, reducing the risk of being caught out by adverse news on diplomacy or supply.

This distinction is important. A short-covering rally can lift prices even when physical supply-and-demand fundamentals have not materially tightened. The modest advance therefore said more about positioning and uncertainty than it did about a confirmed deterioration in oil availability.

Why analysts could not settle on one forecast

The key variables—diplomatic progress, the reliability of Saudi export alternatives, and security for regional shipping—were difficult to predict. JPMorgan said it had no clear baseline scenario for oil markets and that it did not know how to model the conflict’s endgame.

Goldman Sachs illustrated the unusually broad range of potential outcomes. It said oil could fall toward $80 a barrel if regional exports normalized, but could rise as high as $120 if attacks on Middle Eastern shipping intensified.

What to watch next

The immediate direction of crude prices depended on whether developments validated the diplomatic narrative or renewed fears of supply disruption. The most consequential signals were:

1. Any concrete U.S.–Iran engagement at the UN General Assembly. A credible route to de-escalation could further reduce the geopolitical risk premium.
2. Saudi export volumes and loading activity. Sustained Gulf loadings would show that rerouting is cushioning the East–West pipeline outage.
3. Conditions in the Strait of Hormuz. Because more Saudi crude was moving through the waterway, any deterioration in shipping security could have an outsized effect on prices.

The September 22 move was therefore best understood as a cautious stabilization after a steep decline—not a firm verdict that supply risks had passed. 12