Oil prices extended their decline early Thursday after reports that Saudi Arabia is offering extra crude cargoes to Asian refiners through Oman's Sohar port, easing fears of Middle East supply disruption tied to pipeline attacks. Both Brent and WTI fell for a second straight session, even as regional fighting continued and a smaller-than-expected U.S. inventory draw added pressure.
Oil fell in early trade on Thursday, extending Wednesday's losses, after reports that Saudi Arabia is offering extra crude cargoes through Oman eased fears of a Middle East supply disruption. Brent crude futures dropped $1.24, or 1.2%, to $104.59 a barrel, while U.S. West Texas Intermediate futures fell $1.14, or 1.1%, to $101.29. Both contracts had already fallen about $3 on Wednesday.
Saudi Arabia reroutes cargoes through Oman
Saudi Arabia is offering more loadings of crude oil to Asian refiners via ship-to-ship transfers off Oman's Sohar port, according to people familiar with the matter, blunting some of the hit to global supply from attacks on the kingdom's East-West pipeline to the Red Sea. According to Reuters: "over supply tightness eased slightly following news that Saudi Arabia would ship cargo via Oman", said Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, a unit of Nissan Securities.
He added that expectations of progress toward easing Middle East tensions ahead of next week's U.S.-China summit are also capping price gains.
Yanbu suspension pushed prices to four-month highs
Prices had risen to about four-month highs earlier this week after shipping industry sources said crude loadings at Saudi Arabia's Red Sea export hub of Yanbu had been suspended. Riyadh had cancelled some cargo deliveries to European customers, and the suspension followed attacks on the East-West pipeline, which feeds the Yanbu port.
Yanbu became Saudi Arabia's main export outlet after Iran began blockading the Strait of Hormuz following the U.S. and Israeli attack on the country at the end of February; Hormuz previously carried one-fifth of the world's oil supply. Two pumping stations serving the East-West pipeline were damaged in an attack last week, and the repair timeline remains unclear, according to assessments from three oil and security sources.
War and a smaller inventory draw keep pressure on
Despite Thursday's decline, worries about the intensifying Middle East war remain. Saudi warplanes pounded Yemen and Houthi fighters launched drones and missiles at Saudi cities, the Iran-backed movement said on Wednesday, after a rapid advance that has extended Tehran's reach in the conflict.
Meanwhile, the U.S. Energy Information Administration reported a smaller-than-expected draw from crude inventories last week. Stocks in the top-producing nation fell about 640,000 barrels, compared with expectations of a 1.62 million-barrel draw according to a Reuters poll of energy analysts.
Source: Commodities & Futures News (Investing.com)
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