Oil prices fell on Thursday, extending the previous session’s losses, as reports that Saudi Arabia was arranging additional crude shipments through Oman eased concerns over supply disruptions in the Middle East.Brent crude futures fell $1.24, or 1.2%, to $104.59 a barrel by 0049 GMT, while US West Texas Intermediate futures dropped $1.14, or 1.1%, to $101.29. Both contracts fell about $3 on Wednesday.“Concerns over supply tightness eased slightly following news that Saudi Arabia would ship cargo via Oman,” said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, a unit of Nissan Securities, to Reuters.Expectations of progress towards easing tensions in the Middle East ahead of a US-China summit next week were also capping prices, he added.
Saudi seeks alternative routes
Saudi Arabia is offering additional crude cargoes to Asian refiners through ship-to-ship transfers off Oman’s Sohar port, people familiar with the matter said.The move could partly offset the disruption to Saudi exports after attacks damaged its East-West pipeline, which carries crude to the Red Sea port of Yanbu and provides an alternative to the Strait of Hormuz.The pipeline has been damaged by drone attacks, with two pumping stations hit last week. Saudi Arabia is now working to restore part of its capacity within days and return the pipeline to full operation within about six weeks, according to the information cited in the market reports.The disruption has increased pressure on other export routes. Saudi Arabia has also stepped up efforts to move more crude through the Strait of Hormuz with US military assistance.
Hormuz risk remains
The Strait of Hormuz has become even more important to global oil markets after the Saudi pipeline disruption. Before the conflict, about one-fifth of the world’s oil supply passed through the waterway.US Energy Secretary Chris Wright said 18 million barrels of crude and petroleum products moved through Hormuz earlier this week.Oil prices had climbed to about four-month highs earlier this week after the suspension of crude loadings at Yanbu and cancellations of some Saudi cargoes to European customers.Analysts at Standard Chartered said the damage to the East-West pipeline had weakened a key alternative to Hormuz and increased the risk around Saudi exports. The bank expects the geopolitical risk premium to remain elevated as disruptions affect both Hormuz-linked flows and alternative export routes.
US stocks offer another signal
US crude inventories fell by 640,000 barrels last week to 423.4 million barrels, according to Energy Information Administration data.The decline was smaller than the 1.62 million-barrel draw expected by analysts in a Reuters poll. It also differed sharply from an earlier American Petroleum Institute estimate that had indicated a 7.1 million-barrel increase.Despite Thursday’s decline, oil markets remain sensitive to developments in the Middle East, with attacks on energy infrastructure and disruptions around key shipping routes continuing to pose risks to global supplies.
