Oil Below $100 as Supply Concerns Recede

The chief executive of Vitol, the global commodities trading giant, said that approximately 12 million barrels of crude oil and 2 million barrels of refined products were leaving the Middle East daily over the past seven to ten days. Oil prices reversed their earlier gains during trading, declining as strong crude exports from the Middle East and drawdowns of emergency reserves by the Group of Seven helped ease supply concerns. However, ongoing security risks in the region limited the extent of the decline.

Brent crude futures fell 83 cents, or 0.8 percent, to $99.49 per barrel by 0650 GMT, while U.S. West Texas Intermediate crude futures dropped $1, or 1.1 percent, to $88.43 per barrel.

“Shipping data show that crude exports from the region actually exceeded pre-war levels on several days in late September,” said Priyanka Sachdeva, head of market research at Philip Nova, according to Reuters. “Alternative routes and logistical adjustments have, to some extent, allowed producers to maintain supply flows despite disruptions around the Strait of Hormuz.”

She added, “However, it does not yet make sense to consider this a full return to normal supply conditions. There have been new attacks on oil tankers in the Strait of Hormuz area, and the number of incidents has risen over recent days. This means that although oil shipments continue to flow, the costs of transportation, insurance, routing, and associated security risks remain elevated.”

Data showed that oil flows from the Gulf region, excluding Iran, rose to more than 81 percent of pre-war levels in September, supported by a recovery in Saudi exports despite escalating Iranian attacks on shipping in the area. Meanwhile, Iranian exports fell to zero due to U.S. sanctions.

In a note, ING analysts said that while the market remains concerned about the possibility of supply disruptions from the region, Gulf oil producers continue to adapt to the prevailing situation.