Saudi Arabia Pulls the Brake on Oil Price Rally with New Export Route
Crude oil prices fell more than one percent in Thursday's global market trading, driven by Saudi Arabia's diversion of oil cargoes through Oman for Asian buyers, the diplomatic outlook for the US-China summit, and the US weekly inventory report.
Brent crude futures fell $1.24, or 1.2%, to $104.59 per barrel, while US West Texas Intermediate (WTI) crude futures dropped $1.14, or 1.1%, to $101.29 per barrel.
Both contracts had fallen about $3 on Wednesday.
Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment (a subsidiary of Nissan Securities), said: “Concerns about supply shortages eased somewhat after news emerged of Saudi Arabia shipping cargoes via Oman.” He added: “Expectations for progress toward de-escalation in the Middle East ahead of next week’s US-China summit have also prevented prices from rising further.”
Informed individuals stated that Saudi Arabia is supplying larger volumes of crude oil to Asian refineries through ship-to-ship transfer operations near Oman’s Sohar port. This measure partially offsets the blow to global oil supply from damage to Saudi Arabia’s East-West pipeline (leading to the Red Sea).
Oil prices earlier this week climbed to their highest level in about four months. This increase occurred after shipping industry sources announced that crude oil loading at Yanbu—Saudi Arabia’s main export terminal on the Red Sea—had halted, and Riyadh canceled deliveries of some cargoes to European customers. The halt followed attacks on the East-West pipeline, which feeds Saudi Arabia’s Yanbu port.
According to assessments by three oil and security sources, two pumping stations on the East-West pipeline were damaged in last week’s attack, and the timeline for their repair is unclear.
According to a Reuters report, despite the oil price decline on Thursday, concerns about escalating war in the Middle East persist.
Meanwhile, the US Energy Information Administration reported on Wednesday that the decline in US crude oil inventories last week was less than expected. Data from the agency shows US crude stocks fell by about 640,000 barrels last week, while energy analysts in a Reuters poll had forecast a decline of 1.62 million barrels.