Story
Oil Prices Fall as Saudi Supply Hopes Outweigh Geopolitical Risks
Summary
Oil futures settled lower on Thursday, with Brent crude below $105, as reports of increased Saudi supply to Asia and pipeline repairs overshadowed ongoing geopolitical risks in the Middle East.
Oil prices settled about 1% lower on Thursday but remained above the $100 per barrel threshold, as investors weighed signs of increased Saudi Arabian supply against persistent geopolitical tensions in the Middle East.
According to Reuters, Brent crude futures for November delivery closed down $1.01, or 0.95%, at $104.82 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell 52 cents, or 0.5%, to settle at $101.91 a barrel. The decline extended losses from the previous session, where both benchmarks had fallen approximately 3%.
Easing Supply Concerns
The session's downward pressure on prices stemmed from reports that Saudi Arabia was offering additional crude cargoes to Asian refiners. The supply is reportedly being facilitated through ship-to-ship transfers near Oman's Sohar port, helping to bypass disruptions from recent attacks on the Kingdom's East-West pipeline.
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AdBloomberg also reported that Saudi Arabia aims to restore about half of the pipeline's capacity within days. The pipeline, which supplies the critical Red Sea export terminal of Yanbu, was halted last week after drone attacks. Traders estimate a prolonged shutdown could remove as much as 4% of global oil supply from the market.
Persistent Market Tightness
Despite the potential for more Saudi oil, underlying market tightness and regional conflict limited further price declines. "The physical market remains tight, limiting the scope for further declines," said Christopher Tahir, senior market strategist at Exness, in a note. Tahir cited falling tanker traffic through the Strait of Hormuz and the continued exposure of Red Sea shipping to attacks.
Beyond crude, markets for refined products are also feeling the strain. European gasoil futures, a benchmark for diesel, settled at a record high on Tuesday, as did U.S. ultra-low sulfur diesel futures. The tightness was exacerbated by news on Thursday that a Ukrainian drone attack had damaged a refinery in the Russian city of Yaroslavl.
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