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Oil prices fell on Thursday as additional Saudi crude shipments through Oman eased concerns over global supply disruptions, although prices remained above $100 a barrel amid fears that the Middle East conflict could widen.
Brent crude futures fell $1.50, or 1.42%, to $104.33 a barrel by 1000 GMT, while US West Texas Intermediate futures dropped $1.09, or 1.06%, to $101.34. Both contracts fell by about $3 on Wednesday.
Saudi Arabia is offering additional crude cargoes to Asian refiners through ship-to-ship transfers off Oman’s Sohar port, according to people familiar with the matter. The move is helping offset some of the disruption caused by attacks on the East-West pipeline that supplies the Red Sea export hub of Yanbu.
Oil prices had climbed to around four-month highs earlier this week after Saudi Arabia suspended crude loadings at Yanbu and cancelled some cargoes for European customers following attacks on the pipeline.
Traders estimate that a prolonged shutdown of the East-West pipeline could disrupt as much as 4% of global oil supply. Saudi Arabia has not said when the pipeline will fully resume operations, but US Energy Secretary Chris Wright said on Tuesday that crude could begin flowing through it again within days.
KCM Trade chief market analyst Tim Waterer said oil had retreated from its weekly highs after Wright signalled a quicker restoration of the pipeline and Saudi efforts to maintain exports through Oman eased supply concerns.
Supply risks remain
Despite the decline in crude prices, concerns over the broader Middle East conflict remain. Two pumping stations serving the East-West pipeline were damaged in an attack last week, and the timeline for repairs remains unclear, according to oil and security sources.
Singapore-based DBS Bank said its fourth-quarter base-case outlook assumes tensions between the United States and Iran will ease, allowing Brent prices to stabilise between $85 and $95 a barrel.
Diesel market tightens
The oil market is also facing growing pressure from tightening diesel supplies as disruptions to energy infrastructure in the Middle East and Russia constrain refined fuel availability.
European gasoil futures, a benchmark for diesel prices, settled at a record high on Tuesday, while US ultra-low-sulfur diesel futures also closed at a record high.
“Product tightness could easily become a bigger issue than crude supply itself in the near term, especially with Russian refining capacity also constrained,” Waterer said.
A Ukrainian drone attack also damaged a refinery in the Russian city of Yaroslavl on Thursday, causing a fire that was later extinguished, regional Governor Mikhail Yevrayev said.
Goldman Sachs said concerns over diesel shortages and rising prices were encouraging refiners to prioritise diesel production over gasoline.