Oil prices declined approximately 1% on Friday, extending losses for a third consecutive session, though both major benchmarks remained above the $100 per barrel mark. The decline was driven by market optimism regarding alternative routes for crude exports from the Middle East, which outweighed concerns stemming from ongoing military exchanges between Saudi Arabia and Yemen's Houthis. Brent crude futures fell $1.01, or 1%, to close at $103.77 a barrel by 0020 GMT, while US West Texas Intermediate futures declined $1.03, or 1%, to $100.88 a barrel.
Both benchmarks had already closed down approximately 1% on Thursday. Despite fresh strikes exchanged across the Saudi Arabia-Yemen border on Thursday, which further expanded the Middle East conflict, markets largely dismissed new supply threat concerns. Oil prices had climbed to approximately four-month highs earlier in the week following reports that crude loadings at Saudi Arabia's Red Sea export hub of Yanbu had been suspended and that Riyadh had cancelled some deliveries to Europe after its East-West pipeline sustained damage from an attack the previous week.
According to sources consulted by Reuters, estimates on the timeframe for pipeline reopening and the return of crude flows to normal levels vary considerably. Satellite imagery and three industry sources confirmed that three of the pipeline's pumping stations were damaged, one more than previously assessed. A prolonged closure of the pipeline to Yanbu could result in supply cuts of as much as 4% of global oil supply, according to traders.
Bloomberg reported that Saudi Arabia was attempting to restore approximately half the capacity of its East-West oil pipeline within days following the drone attacks that halted the critical link to the Red Sea. Additionally, Saudi Arabia was offering increased crude cargoes to Asian refiners through ship-to-ship transfers off Oman's Sohar port, a measure intended to mitigate some of the disruption caused by the pipeline attacks. US Energy Secretary Chris Wright stated that crude should be flowing through the pipeline within days, signaling confidence in relatively rapid restoration efforts.
Security concerns extended beyond the pipeline issue. Iran's Revolutionary Guards Navy reported that a Togo-flagged oil tanker was struck while attempting what they characterized as an "illegal passage" through the Strait of Hormuz on Thursday, according to Iranian state media reports released early Friday. Market uncertainty was underscored by JPMorgan's statement on Thursday that the institution does not maintain a clear baseline view for oil markets for the first time since the beginning of the US-Israeli war on Iran.
The US and Iran have engaged in no peace talks since an interim agreement reached in June collapsed within weeks. The ongoing conflict is expected to be discussed at the United Nations General Assembly next week, with an Iranian delegation permitted to attend according to the US State Department.
Source: reuters.com