Oil prices fell for a third consecutive session on Friday as Saudi Arabia moved to restore disrupted exports, but markets remain focused on whether repairs to the East-West pipeline and improving Strait of Hormuz flows will be enough to ease tight physical crude supplies. Brent crude for November delivery was quoted at 103.67 dollars per barrel as of 05:20 GMT, down 1.15 dollars from the previous session, while WTI October futures stood at 101.04 dollars per barrel, down 0.87 dollars. Brent crude has remained above 100 dollars per barrel since 9 September following attacks on Saudi energy infrastructure, highlighting continued market concerns over Middle East oil supplies.
On 17 September, Brent crude fell below 105 dollars per barrel for the first time in more than a week as concerns over Saudi supply disruptions eased. Despite fresh exchanges of strikes between Saudi Arabia and Iran-backed Houthi rebels in Yemen on 17 September, traders focused on improving Saudi export flows rather than the prospect of further disruptions to regional energy supplies. Oil prices extended losses on Friday after reports that Saudi Arabia was increasing crude deliveries to Asia through ship-to-ship transfers off Sohar in Oman, while working to restore capacity on its East-West pipeline, which was attacked earlier this month.
Saudi Arabia is targeting the return of about half the pipeline's capacity within days and full restoration within six weeks, according to media reports. The 1,200-kilometer East-West pipeline connects Saudi Arabia's eastern producing region with the Red Sea export terminal of Yanbu, allowing crude exports to bypass the Strait of Hormuz. The pipeline was estimated to have moved 4 million to 5 million barrels per day of crude before attacks earlier this month damaged three pumping stations.
Loadings at Yanbu were suspended, affecting some customers in Europe, prompting refiners to seek alternative barrels from the North Sea, the US, Kazakhstan, Algeria and Guyana. While the emergence of ship-to-ship transfers off Oman has alleviated some concerns over Saudi exports, the transfers are unlikely to fully replace volumes previously moving through Yanbu, which has a nameplate export capacity of 5 million barrels per day. Current Yanbu crude inventories were likely sufficient for only five to seven days after the pipeline attack, raising the prospect that storage tanks are now largely depleted.
Oil flows through the Strait of Hormuz have improved in recent weeks, although the market remains vulnerable to further disruption. US Energy Secretary Chris Wright said on 16 September that approximately 18 million barrels per day of crude and petroleum products moved through the Gulf on 15 September, approaching pre-conflict levels. However, Saudi Arabia is currently more reliant on exports moving through the Strait of Hormuz until the East-West pipeline is fully restored, leaving shipments more exposed to potential disruptions in the Persian Gulf.
Attacks by Yemen's Iran-backed Houthi rebels against energy and shipping infrastructure in the Red Sea corridor have kept traders cautious despite the recovery in Hormuz flows. China has reportedly urged Iran to help restrain Houthi activity following an appeal from Saudi Arabia, according to Reuters, while market attention is also turning to diplomatic developments involving the US, Iran and regional Gulf Cooperation Council states. Despite recent declines in futures, physical crude markets continue to reflect immediate supply scarcity.
Dated Brent, the benchmark for prompt North Sea crude cargoes delivered into Europe, rose above 130 dollars per barrel on 14 September before easing to around 121 dollars per barrel as refiners competed for immediately available supplies following disruptions to Middle East exports. The market has also remained in steep backwardation, where prompt cargoes trade at significant premiums to later deliveries, indicating buyers are willing to pay substantially more for crude available today. Additional Saudi cargoes and progress on pipeline repairs may help ease the pressure, but traders said physical markets are likely to remain tight until export routes stabilize and normal shipping conditions through Hormuz are restored.
The East-West pipeline outage has effectively placed volumes equivalent to around 4 percent of global crude supply at risk, with replacement barrels likely to be more expensive and logistically challenging to secure through alternative routes. The supply disruption has had a much greater impact on Asian refiners than on their Atlantic Basin counterparts. Dubai crude's prompt first-month to second-month time spread reached 23.27 dollars per barrel on 10 September, compared with 4.91 dollars per barrel for Brent, signaling intense competition for prompt Middle East crude.
Asian refiners rely heavily on Middle East barrels priced against Dubai benchmarks, while Atlantic Basin refiners can access crude from the North Sea, West Africa, Guyana and the US. According to analysis from Mofferies Investment Research, Asia is carrying the impact of Hormuz-related crude scarcity through higher feedstock costs, while the Atlantic Basin is largely experiencing the disruption through stronger product prices. The Singapore Dubai cracking margin fell to minus 2.80 dollars per barrel on 10 September, indicating that refiners processing Dubai-linked crude were losing money.
By comparison, the US Gulf Coast Louisiana Light Sweet refining margin reached 53.18 dollars per barrel, while margins for producing ultra-low sulphur diesel climbed to 89.62 dollars per barrel. Sustained negative margins could prompt refinery run cuts in South Korea, Taiwan, Thailand and among China's independent refiners during October maintenance programs. Lower operating rates would reduce demand for Dubai-priced crude and tighten regional fuel supplies, potentially allowing Asian refining margins to recover.
Diesel markets have emerged as another source of concern as Middle East disruptions coincide with outages at Russian refining facilities. European gasoil and US ultra-low sulphur diesel futures have reached record highs, with diesel prices in Europe and the US exceeding 220 dollars per barrel by mid-September. A Ukrainian drone attack damaged a refinery in the Russian city of Yaroslavl on 17 September, adding to concerns over middle-distillate supplies.
Asian diesel supplies remain comparatively plentiful but are increasingly difficult to move west because of elevated freight costs and shipping disruptions. The east-west gasoil exchange of futures for swaps stood at minus 146.69 dollars per tonne on 10 September, while Suez Canal traffic was running at 37 percent below pre-crisis levels. Longer voyages around the Cape of Good Hope in Africa have sharply increased tanker demand and freight costs.
Arab Gulf-to-Japan very large crude carrier freight on 10 September reached 168.40 dollars per tonne, around eight times its five-year average. Elevated freights limit the movement of surplus Asian diesel into Atlantic Basin markets and reinforce regional imbalances, while also increasing costs across global oil supply chains. Meanwhile, possible Chinese restrictions on clean-product exports during the fourth quarter could further tighten regional fuel availability if domestic supply security becomes a priority again.
The US Federal Reserve's first interest-rate hike in three years has raised concerns about slower economic growth and weaker oil demand, particularly as elevated fuel prices continue to fuel inflationary pressures. The Bank of Japan raised its policy rate to 1.25 percent on Friday, its highest level since 1995. While the immediate impact on oil demand is expected to be limited, the move underscores a broader trend toward tighter monetary policy among major economies.
Higher borrowing costs could ultimately cap further gains in crude prices even if Middle East supply risks persist. Source: ICIS (International Chemical Information Services), 18 September 2026
Source: icis.com