Oil prices fell on Wednesday after reports that Saudi Arabia is rerouting additional crude cargoes through Oman eased concerns about the scale of Middle East supply disruptions. U.S. crude, gasoline and distillate inventories all rose last week, while European diesel prices held near a record high.
Brent crude futures dropped $1.69, or 1.55%, to $107.06 a barrel by 1128 GMT on Wednesday. U.S. West Texas Intermediate futures fell $2.6, or 2.46%, to $103.23 a barrel over the same period.
The declines came a day after oil prices settled more than $3 higher on reports that crude loadings at Saudi Arabia's Red Sea export hub of Yanbu had been suspended and that Riyadh had cancelled some cargo deliveries to European customers. That deepened concerns that disruptions to a critical export route could persist for weeks.
Saudi Arabia reroutes crude through Oman
Saudi Arabia is now offering more crude oil loadings to Asian refiners via ship-to-ship transfer off Oman's Sohar port, after drone attacks damaged its oil pipeline to the Red Sea, people familiar with the matter said. UBS analyst Giovanni Staunovo said news of Saudi Arabia exporting from the Gulf suggests concerns that the disruption could be larger are easing.
Visible vessel transits through the Strait of Hormuz stayed in the single digits at four on Tuesday, down from seven a day earlier, well below the 10-day average of 18. The waterway handled a fifth of the world's oil and liquefied natural gas supply before the U.S.-Israeli war on Iran began in late February.
Macquarie analysts said flows of crude, condensate and refined products through the strait had remained resilient despite escalating hostilities in the region, and may have risen to more than 7.5 million barrels per day since fighting resumed on August 30. They said the link between developments in the strait and oil flows had weakened.
Diesel tightness persists
European gasoil futures, a benchmark for diesel prices, rose to their highest intraday level since April on Tuesday before settling at a record high, though they eased again on Wednesday. According to Frank Walbaum, market analyst at Naga.com: "Diesel's strength reflects a product-specific shortage layered on top of expensive crude." He added that Europe has lost substantial diesel and jet-fuel supply from the Middle East, while tensions in Eastern Europe have disrupted output at several major Russian refineries and prompted Moscow to restrict fuel exports.
Last week, the U.S. national average price of diesel surpassed $6 a gallon for the first time ever. The Russian government has decided to extend restrictions on diesel exports for fuel producers until the end of October, Vedomosti daily reported, citing two unidentified sources. Staunovo said he would expect diesel prices to stay supported unless there is a peace deal or an improvement in the situation in Russia.
U.S. inventories weigh on prices
U.S. crude oil, gasoline and distillate inventories all rose last week, market sources said, citing data from the American Petroleum Institute. Crude inventories rose by 7.1 million barrels in the week ended September 11, compared with analysts' expectations for a draw of about 1.6 million barrels, according to a Reuters poll.
Citi expects near-term escalation in the Middle East to continue supporting crude oil and refined fuel prices before the Strait of Hormuz eventually reopens in the fourth quarter of 2026, with support from regional diplomatic efforts, the bank said in a note.
Source: Investing.com
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