Key facts
- Oil prices decreased on Thursday as reports of additional Saudi crude cargoes eased supply concerns.
- Brent crude futures were down 1.03% to $104.74 a barrel.
- US West Texas Intermediate futures were down 0.81% to $101.6 a barrel.
- Tightening diesel supplies are a source of pressure due to disruptions in the Middle East and Russia.
- Saudi Arabia is offering more crude cargoes through ship-to-ship transfers off Oman’s Sohar port.
- A Ukrainian drone attack damaged a refinery in the Russian city of Yaroslavl.
Oil prices fell on Thursday, extending previous day's losses as reports of additional Saudi crude cargoes eased supply concerns, although prices remained above $100 a barrel amid fears of the Middle East conflict widening. Brent crude futures were down US$1.09, or 1.03 per cent, to US$104.74 a barrel at 4:01 a.m. ET, while US West Texas Intermediate futures were down 83 US cents, or 0.81 per cent, at US$101.6 a barrel. Both contracts had fallen about US$3 on Wednesday.
Crude retreated from weekly highs after US Energy Secretary Chris Wright signaled a quicker return to service for Saudi Arabia’s East-West pipeline, while Saudi efforts to maintain shipments via additional loadings off Oman eased supply worries, said Tim Waterer, chief market analyst at KCM Trade. Saudi Arabia is offering more crude cargoes to Asian refiners through ship-to-ship transfers off Oman’s Sohar port, people familiar with the matter said, helping offset some of the disruption caused by attacks on the East-West pipeline to the Red Sea.
Oil prices had climbed to around 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 canceled some cargo deliveries to European customers. The suspension followed attacks on the East-West pipeline, which supplies Yanbu. Traders say a prolonged closure of the pipeline could cut off as much as 4 per cent of global oil supply. Saudi Arabia has not said when operations might resume, but Wright told CNBC on Tuesday that crude should be flowing through the pipeline within days.
Despite Thursday’s decline in oil prices, concerns about the escalating Middle East conflict remain. Two pumping stations serving the East-West pipeline were damaged in an attack last week, and the repair timeline remains unclear, according to assessments from three oil and security sources. Saudi warplanes pounded Yemen while Houthi fighters launched drones and missiles at Saudi cities, the Iran-backed movement said on Wednesday, following a rapid advance that has expanded Tehran’s reach in the regional conflict.
Singapore’s DBS Bank said its base-case scenario for the fourth quarter assumes tensions between the U.S. and Iran will ease, allowing Brent to stabilize in an US$85 to US$95 a barrel range.
While crude supply disruptions remain the market’s main concern, tightening diesel supplies have emerged as another source of pressure as disruptions to energy infrastructure in the Middle East and Russia constrain fuel availability. European gasoil futures, a benchmark for diesel prices, settled at a record high on Tuesday. U.S. ultra-low sulfur diesel futures also settled 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 damaged a refinery in the Russian city of Yaroslavl, causing a fire that was later extinguished, regional Governor Mikhail Yevrayev said on Thursday. Goldman Sachs said in a note that concerns over diesel shortages and the resulting price rally had encouraged refiners to prioritize diesel production over gasoline.