Oil prices fell in early Thursday trading, extending the previous day's losses, as reports of Saudi Arabia offering additional crude cargoes through Oman reduced fears of supply disruptions in the Middle East. Brent crude futures dropped 1.24 dollars, or 1.2%, to 104.59 dollars a barrel by 0049 GMT, while U.S. West Texas Intermediate futures were down 1.14 dollars, or 1.1%, at 101.29 dollars.
Both contracts fell approximately 3 dollars on Wednesday, according to Reuters reporting. Saudi Arabia is offering more loadings of crude oil to Asian refiners via ship-to-ship transfers off Oman's Sohar port, according to sources cited in the article. This move blunted some of the impact to global supply from attacks on Saudi Arabia's East-West pipeline to the Red Sea.
Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, noted that concerns over supply tightness eased following the news that Saudi Arabia would ship cargo via Oman. Oil prices had risen to approximately four-month highs earlier this week after reports indicated that crude loadings at Saudi Arabia's Red Sea export hub of Yanbu had been suspended and Riyadh had cancelled some cargo deliveries to European customers. The suspension followed attacks on the East-West pipeline, which feeds the Saudi port of Yanbu.
Yanbu became Saudi Arabia's main outlet for oil exports after Iran began blockading the Strait of Hormuz following U.S. and Israel military action against the country at the end of February. Prior to the war, the Strait of Hormuz was the conduit for one-fifth of the world's oil supply. Two pumping stations serving the East-West pipeline were damaged in an attack last week, with a repair timeline remaining unclear according to assessments from three oil and security sources.
Expectations of progress toward easing tensions in the Middle East ahead of a U.S.-China summit scheduled for the following week also contributed to capping price gains, according to Kikukawa's assessment. Despite the oil price decline on Thursday, worries about the intensifying Middle East war remain. Saudi warplanes pounded Yemen and Houthi fighters launched drones and missiles at Saudi cities on Wednesday, according to the Iran-backed movement, following a lightning advance that extended Tehran's reach in the Middle East conflict.
On the domestic front, the U.S. Energy Information Administration reported a smaller-than-expected draw from U.S. crude inventories. Crude oil stocks in the top-producing nation fell approximately 640,000 barrels last week, compared to expectations of a 1.62 million-barrel draw according to a Reuters poll of energy analysts.
Source: reuters.com