Oil prices fell for a second day on Thursday after reports that Saudi Arabia is routing extra crude cargoes through Oman, easing fears of supply disruption from attacks on the kingdom's East-West pipeline. Brent and WTI both remain above $100 a barrel as the Middle East conflict continues.
Prices ease on Saudi rerouting
Brent crude futures dropped $1.88, or 1.8%, to $103.95 a barrel by 0632 GMT on Thursday, while U.S. West Texas Intermediate futures fell $1.77, or 1.7%, to $100.66 a barrel. Both contracts had already fallen about $3 on Wednesday.
Saudi Arabia is offering more loadings of crude oil to Asian refiners through ship-to-ship transfers off Oman's Sohar port, people familiar with the matter said. The move blunts some of the hit to global supply from attacks on the kingdom's East-West pipeline to the Red Sea. However, some analysts expect these flows to only ease a portion of the supply loss from the Red Sea port, which is capping the price declines.
Pipeline attacks still limit exports
Oil 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 and Riyadh had cancelled some cargo deliveries to European customers. 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. Before the war, Hormuz 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 three oil and security sources.
Saxo Bank analysts said the pick-up in flows through the Strait of Hormuz is only partly offsetting lost export barrels following the drone attacks that shut the East-West pipeline.
War risk still caps the downside
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, following an advance that has extended Tehran's reach in the conflict.
Singapore's DBS Bank assumes in its base-case scenario for the fourth quarter that the U.S. war with Iran will dial down and Brent will stabilize in the $85 to $95 range. According to Reuters, DBS Bank's head of energy research Suvro Sarkar said "prices could spike towards $120/bbl levels before potentially normalising back towards $100/bbl" under the bank's bear-case scenario, in which attacks and incidents in Hormuz and the Red Sea continue.
Source: Investing.com
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