Oil prices fell again on Thursday, September 17, as fresh Saudi crude supplies helped calm fears about a major oil shortage in the Middle East.
Brent crude futures fell by $1.24, or 1.2%, to $104.59 a barrel by 0049 GMT. US West Texas Intermediate, also known as WTI, fell by $1.14, or 1.1%, to $101.29 a barrel.
The fall came one day after both oil benchmarks lost about $3 a barrel. Brent had settled at $105.83 on Wednesday after a fall of 2.7%, while WTI closed at $102.43 after a fall of 3.2%.
The latest move shows that the oil market has become very sensitive to news about supply routes. A new source of Saudi crude has reduced some of the fear that global buyers could face a sharp shortage.
Saudi Arabia Offers More Oil Through Oman
The main reason for the latest price fall is a change in the way Saudi Arabia can send crude to Asian buyers.
Saudi Arabia has offered more crude oil cargoes to Asian refiners through ship-to-ship transfers near Sohar port in Oman, according to people familiar with the matter.
This route gives Saudi Arabia another way to move oil at a time when damage to its East-West pipeline has hurt normal export flows.
The pipeline is important because it carries Saudi crude toward the Red Sea. Recent attacks damaged two pumping stations on the route. The exact repair time is still not clear.
The new supply route does not solve every problem, but it gives the market some relief. Buyers can still receive Saudi crude even as one key part of the normal export system faces damage.
Why the Saudi Pipeline Matters
Saudi Arabia is one of the world’s largest oil producers, so any major problem with its export system can have a quick effect on global prices.
The East-West pipeline has become even more important because of the severe disruption around the Strait of Hormuz.
The Strait is one of the most important oil routes in the world. Before the current conflict, about one-fifth of the world’s oil supply passed through the waterway.
Iran began a blockade of the Strait after US and Israeli attacks on Iran at the end of February. Since then, normal oil transport through the area has faced major problems.
The low level of vessel traffic has added to market fear. Preliminary data showed only four vessel passages through the Strait on Tuesday, compared with a 10-day average of 18.
That sharp difference has made traders more alert to every report about Saudi exports and other supply routes.
Yanbu Export Problems Add More Pressure
The oil market had moved higher earlier this week after reports of problems at Saudi Arabia’s Yanbu export hub.
Crude loadings at Yanbu were suspended after attacks on the East-West pipeline. Saudi Arabia also cancelled some crude deliveries to European customers.
Yanbu became a key outlet for Saudi oil after the problems at the Strait of Hormuz. Any long halt at the port could have reduced the amount of crude available to international buyers.
This was one reason oil prices rose to about four-month highs earlier this week.
The new Saudi plan through Oman has changed part of that picture. It shows that Saudi Arabia still has other ways to get some crude to customers.
That does not mean the supply problem has ended. It only means that the immediate risk of a much larger shortage has become less severe.
US Oil Stocks Also Put Pressure on Prices
Another factor behind the lower oil prices came from the United States.
Data from the US Energy Information Administration showed that US crude stocks fell by about 640,000 barrels last week.
At first glance, a fall in crude stocks can support oil prices because it suggests that more oil has left storage. But the size of the fall was much smaller than the market expected.
A Reuters poll of energy analysts had forecast a decline of about 1.62 million barrels.
The difference matters because it suggests that US oil supply was not as tight as some traders had expected.
US gasoline and distillate stocks also rose last week. The rise in diesel stocks was larger than expected, while analysts had expected gasoline stocks to fall.
These figures added another reason for the recent pressure on oil prices.
Middle East Risk Has Not Gone Away
Despite the latest price fall, the oil market remains under heavy pressure from the wider conflict in the Middle East.
Saudi warplanes carried out strikes in Yemen, while Houthi forces said they launched missiles and drones at Saudi cities.
The wider conflict creates a serious risk for oil routes, ports, pipelines and other energy facilities.
This is why the latest price fall should not be seen as a sign that the oil supply problem is over. The market can change very fast if a major pipeline, port or shipping route faces a new attack.
For now, the extra Saudi crude available through Oman has reduced some of the immediate fear. But any new disruption could push prices higher again.
What the Market Is Watching
Traders will focus on several issues in the days ahead.
The first is the condition of Saudi Arabia’s East-West pipeline. A quick repair could reduce pressure on Saudi exports. A long repair period could create fresh supply concerns.
The second issue is the Strait of Hormuz. Normal traffic through the waterway is important for global energy supply. Any further fall in vessel traffic could add to oil market pressure.
The third issue is the flow of Saudi crude through Oman. If Saudi Arabia can keep this alternative route active, Asian refiners may have better access to crude despite the problems with other export routes.
The fourth issue is the wider conflict. New attacks on oil facilities or shipping routes could quickly change market sentiment.
Why $100 Oil Matters
Both major oil benchmarks are still close to the $100 a barrel level.
Brent at $104.59 remains above that mark, while WTI at $101.29 is also just above it.
Oil at these levels can have a wide effect on the global economy. Higher crude prices can raise the cost of petrol, diesel, air travel and transport. They can also increase costs for companies that use oil or fuel in their daily operations.
For oil producers, higher prices can support revenue. For oil importers and consumers, the effect can be more difficult, especially if prices stay high for a long period.
The current market is therefore not only about the price of crude. It is also about the wider cost of energy across the global economy.
A Temporary Sense of Relief
The latest fall in oil prices shows that supply fears can ease when buyers see another source of crude.
Saudi Arabia’s extra cargoes through Oman have given the market some breathing room. The move has reduced concern that pipeline damage could cause a much larger shortage.
Still, the basic risks remain. The East-West pipeline has suffered damage, the Strait of Hormuz faces severe disruption, and violence across the region continues.
For now, the market has moved away from its recent highs because some Saudi oil can still reach buyers through an alternative route.
Brent is at $104.59, while WTI is at $101.29. Both remain above $100, which shows that the market still carries a large risk premium because of the conflict.
The next major price move will depend on whether supply routes become more stable or face another shock.
