Oil Prices Extend Losses as Middle East Supply Fears Ease

Brent crude futures dropped 19 cents to $105.64 a barrel, while U.S. West Texas Intermediate futures fell 33 cents to $102.10 a barrel, following steeper declines of about $3 the previous day.

Saudi Arabia Rutes Cargoes Through Oman

To offset the impact of recent attacks on its East-West pipeline, Saudi Arabia is offering additional crude oil loadings to Asian refiners via ship-to-ship transfers off Oman’s Sohar port, according to people familiar with the matter. These alternative flows help bypass the suspended operations at the Red Sea export hub of Yanbu, which became the kingdom’s main outlet after Iran blockaded the Strait of Hormuz following U.S. and Israel attacks at the end of February, as reported by Reuters.

Despite these adjustments, analysts at Saxo Bank noted that the increased shipments through Oman only partly offset the lost export barrels resulting from the drone strikes that shut down the East-West pipeline. Three oil and security sources assessed that two pumping stations serving the pipeline sustained damage last week, leaving a clear repair timeline uncertain.

Market Reactions and Price Projections

Market strategists point to multiple factors influencing current trading ranges. Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, stated that concerns over supply tightness eased slightly following the Oman shipping news, while expectations of progress toward easing tensions ahead of a U.S.-China summit are capping price gains.

Different financial institutions outline varying scenarios for the market. Singapore’s DBS Bank assumes a base case for the fourth quarter where the U.S. war with Iran dials down, stabilizing Brent between $85 and $95 a barrel. However, Suvro Sarkar, head of energy research at DBS Bank, warned that under a prevailing bear case where incidents in Hormuz and the Red Sea continue, prices could spike toward $120 before normalizing back to $100.

Data from the U.S. Energy Information Administration (EIA) also influenced sentiment, showing that U.S. crude inventories fell by approximately 640,000 barrels last week.

Geopolitical Pressures Persist

Even with Thursday’s downward price correction, worries about an intensifying regional war remain prominent. On Wednesday, the Iran-backed Houthi movement reported that Saudi warplanes pounded Yemen while Houthi fighters launched drones and missiles at Saudi cities following a lightning advance that extended Tehran’s reach.

Frequently Asked Questions

Why did oil prices drop recently?

Prices eased after reports indicated that Saudi Arabia is offering extra crude cargoes through Oman via ship-to-ship transfers, which reduced immediate fears of severe global supply shortages.

What caused the suspension of Saudi oil exports at Yanbu?

Crude loadings at the Red Sea export hub of Yanbu were suspended following drone attacks that damaged two pumping stations along the Saudi East-West pipeline.

How much are Brent and WTI trading at?

Brent crude futures traded around $105.64 a barrel, while U.S. West Texas Intermediate futures hovered near $102.10 a barrel following earlier declines.