Oil Prices Retreat as China Urges Iran to Curb Houthi Attacks on Saudi Facilities

Oil prices fell on Friday following reports that China has asked Iran to help curtail attacks by Houthi rebels on oil infrastructure in the Middle East, offering a potential de-escalation of a conflict that has threatened global energy supplies.

Diplomatic Intervention Eases Supply Fears

The move by Beijing, reportedly made at the request of Saudi Arabia, helped ease the geopolitical risk premium that has pushed crude prices higher in recent weeks. The development overshadowed persistent supply concerns, leading to a drop in benchmark futures.

• Brent crude futures settled at $104.87 a barrel, down 95 cents, or 0.93%.
• U.S. West Texas Intermediate (WTI) crude futures finished at $100.30 a barrel, a decline of $1.61, or 1.58%.

Prices had been climbing amid renewed attacks between the U.S. and Iran, along with increased military activity from the Iran-aligned Houthis, which has created new threats to major oil export routes.

Persistent Pipeline and Transit Risks

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Despite Friday's diplomatic news, physical supply disruptions continue to underpin the market. Sources said earlier in the week that crude loadings at Saudi Arabia’s Red Sea export hub of Yanbu were suspended after an attack damaged the crucial East-West pipeline. According to industry sources and satellite imagery, three pumping stations were affected, with a clear timeline for repairs still uncertain.

State-run Saudi Aramco has since informed at least two European customers that they will not receive their scheduled crude oil deliveries next month, Bloomberg News reported on Friday. Traffic through the vital Strait of Hormuz also remains constricted, with preliminary data showing only four commodities vessels passed through on Thursday, well below the 10-day average of about 16.

Refining Constraints Add to Market Uncertainty

Beyond the immediate geopolitical risks, analysts point to a tightening market for refined products as a key supportive factor for prices. "Right now it’s not a supply problem; it’s a refining problem," said Phil Flynn, a senior analyst for Price Futures Group. This bottleneck is contributing to high consumer fuel prices, with U.S. retail diesel hitting a record $6.45 a gallon, according to AAA data.

Refining data provider IIR Energy forecast on Friday that U.S. refining capacity in production is expected to fall by another 371,000 barrels per day (bpd) next week. Analysts at JPMorgan noted the outlook remains murky, stating they lack a clear baseline view for oil markets for the first time since regional tensions escalated in February. "The key question is whether physical flows can normalise and what the timeline could be," said Priyanka Sachdeva, head of market insights at Phillip Nova.