Oil futures continued lower in early trade after a pullback that began the previous session, with traders reacting to reports that Saudi Arabia is arranging additional cargoes via Oman to blunt supply concerns arising from attacks on key export infrastructure.
By 0049 GMT, Brent crude futures were trading at $104.59 a barrel, down $1.24, or 1.2%. U.S. West Texas Intermediate futures fell $1.14, or 1.1%, to $101.29. Both contracts had declined by about $3 on Wednesday.
Market participants pointed to reports that Riyadh is offering extra loadings to Asian refiners through ship-to-ship transfers off the port of Sohar in Oman. Those moves have helped ease some of the immediate concern that attacks on Saudi Arabia’s East-West pipeline and related disruptions would sharply tighten global supplies.
Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, said market sentiment softened after news of the Oman shipments. "Concerns over supply tightness eased slightly following news that Saudi Arabia would ship cargo via Oman," he said. He added that "expectations of progress toward easing tensions in the Middle East ahead of U.S.-China summit next week are also capping price gains."
Earlier in the week, oil climbed to roughly four-month highs after shipping industry sources reported that crude loadings at Saudi Arabia’s Red Sea export hub of Yanbu had been suspended and that Riyadh had cancelled some cargo deliveries to European customers. The suspension was linked to attacks on the East-West pipeline, which supplies oil to the port of Yanbu.
Yanbu has become Saudi Arabia’s principal export outlet after Iran began blockading the Strait of Hormuz following attacks by the U.S. and Israel at the end of February, according to the reporting. Prior to that conflict, the Strait of Hormuz had served as the conduit for one-fifth of the world’s oil supply.
Assessments from three oil and security sources indicated that two pumping stations serving the East-West pipeline were damaged in an attack last week, and the timeline for repairs remained unclear. Those outages contributed to the earlier price spike this week.
Despite the price pullback on Thursday, concerns about the intensifying Middle East conflict persist. The Iran-backed Houthi movement said on Wednesday that, after a rapid advance that it said broadened Tehran’s regional reach, it had launched drones and missiles at Saudi cities. The statement also said Saudi warplanes had pounded Yemen.
Domestic U.S. inventory data added another element to the market picture. The U.S. Energy Information Administration reported a smaller-than-expected draw from U.S. crude inventories last week, with stocks falling by about 640,000 barrels. That reduction was well below the 1.62 million-barrel draw that energy analysts polled by Reuters had expected.
Traders appeared to be weighing the combination of tactical supply responses by Saudi Arabia and ongoing geopolitical risks in the Middle East, together with weaker-than-forecast U.S. inventory adjustments, in setting prices. For now, the market has reacted to signs that some Saudi barrels can be re-routed to limit immediate shortages, while leaving open the prospect of renewed volatility if repairs to pipeline infrastructure remain delayed or if hostilities escalate further.
What this means for markets
- Energy markets are balancing short-term supply mitigation measures against persistent geopolitical risk that could resurface as price volatility.
- Refiners, shipping and insurance sectors remain sensitive to changes in export hub operations and the security of tanker routes.
- Broader commodities and macro markets may track developments in supply infrastructure repairs and any shifts in regional hostilities.