Oil continues to decline as supply disruption fears recede
Oil prices fell today, continuing their decline from the previous session after reports emerged that Saudi Arabia was offering additional shipments of crude oil via Oman, easing concerns about supply disruptions. However, prices remained above $100 amid fears that the conflict in the Middle East could expand.
Meanwhile, the price of a barrel of Kuwaiti crude rose by $1.96 to reach $126.30 per barrel in yesterday’s trading, compared to $124.34 on Tuesday, according to the price announced by the Kuwait Petroleum Corporation.
Hiroyuki Kikukawa, senior analyst at Nisay Securities Investment, said, “Concerns about tight supply eased slightly following news that Saudi Arabia would export shipments via Oman.”
He added, “Price gains are also being capped by expectations of progress toward easing tensions in the Middle East ahead of the US-China summit next week.”
Sources familiar with the matter said Saudi Arabia is offering additional crude shipments for delivery to Asian refiners through ship-to-ship transfers off the port of Sohar in Oman, alleviating some of the pressure on global supplies caused by attacks on the Saudi East-West pipeline.
Analysts at Saxo Bank wrote in a note that the recovery in flows through the Strait of Hormuz “only partially compensates for the lost export barrels following the drone attacks that led to the closure of the Saudi East-West pipeline.”
Oil prices had risen to their highest levels in nearly four months earlier in the week after shipping sector sources reported the suspension of crude oil shipments from the Saudi port of Yanbu on the Red Sea and Riyadh’s cancellation of some deliveries to European customers, following attacks on the pipeline supplying Yanbu with oil.
Yanbu has become Saudi Arabia’s main outlet for oil exports after Iran began closing the Strait of Hormuz following the US and Israel’s war against it in late February. Before the war, five times the volume of global oil supplies passed through the strait.
According to assessments from three sources in the oil and security sectors, two pumping stations serving the East-West pipeline were damaged in last week’s attack, and the timeline for their repair remains unclear.
Despite the drop in oil prices, concerns about the escalation of war in the Middle East persist.
Saudi warplanes bombed Yemen, and the Houthis launched drones and missiles at Saudi cities, the Yemeni group allied with Iran reported on Wednesday, following a rapid advance by the Houthis that expanded Tehran’s influence in the Middle East conflict.
DBS Bank Singapore, in its base-case scenario, expects the US-Iran war to de-escalate and Brent crude to stabilize in a range of $85 to $95 during the fourth quarter.
Sourav Sarkar, head of energy research at the bank, said, “However, under the currently prevailing pessimistic scenario, with ongoing attacks and incidents in the Strait of Hormuz and the Red Sea, prices could rise to levels approaching $120 per barrel before returning to normal levels of $100 per barrel.”
Preliminary ship-tracking data showed today that the number of cargo vessels transiting the Strait of Hormuz dropped to just three on Wednesday, down from 12 the previous day, significantly below the 10-day average of approximately 17 vessels.
These figures exclude any vessels that may have transited the waterway with their transponders turned off to avoid detection.
According to shipping data from Kpler, of the three vessels, one empty Supramax dry bulk carrier entered the strait via the Iranian route, while an empty petroleum products tanker entered via an undisclosed route. The data showed that a Panamax tanker exited the waterway via an undisclosed route. In the Red Sea, the number of vessels transiting the Bab al-Mandab Strait fell to 21 on Wednesday, down from 24 the previous day.
