Crude Prices Slide Sharply as Saudi Supply Fears Ease

Oil prices fell by about 2% on Friday 18 September, extending a losing streak to three sessions as concerns over possible disruptions to Saudi Arabian supplies began to ease. Reuters reported that the market retreated after tensions surrounding the kingdom’s oil infrastructure had driven prices higher earlier in the week.

By 08:06 GMT, Brent crude futures had dropped $2.14, or 2%, to $102.68 a barrel. The decline placed the international benchmark on course for its first weekly loss in three weeks, reversing some of the momentum generated by earlier supply fears.

US West Texas Intermediate futures also moved lower, falling $1.83, or 1.8%, to $100.08 a barrel. Both benchmarks remained above $100, but the Friday losses reflected reduced anxiety over the immediate outlook for Saudi oil flows.

Prices had approached their highest levels in almost four months earlier in the week. That advance followed reports that crude loadings at Yanbu, Saudi Arabia’s Red Sea export hub, had been suspended, raising concerns about the availability of barrels from the major exporting country.

Riyadh had also reportedly cancelled some deliveries to Europe after an attack on a pipeline the previous week. The reported loading suspension and cancelled deliveries increased uncertainty about how quickly normal export operations and crude movements could be maintained or restored.

Those developments unfolded alongside escalating conflict between Saudi Arabia and Yemen’s Houthis, adding to market concerns about future oil supplies. On Thursday, Saudi and Houthi forces exchanged strikes across their border as the regional confrontation continued to affect sentiment around energy production and shipping.

Fresh Saudi airstrikes were reported in Yemen’s Hajjah province and near Taiz, according to Reuters. Saudi Arabia’s civil defence authorities also confirmed the first death inside the kingdom caused by debris after a drone was intercepted over the city of Taif.

The authorities reported that a Yemeni national was killed in the incident. Despite the intensified cross border conflict and the reports of strikes, oil market concerns eased as attention shifted toward efforts to restore capacity on Saudi Arabia’s damaged East-West oil pipeline.

Reports indicated that Saudi Arabia was working to bring back about half of the damaged pipeline’s capacity within days. That prospect helped reduce fears of a prolonged disruption, although industry sources offered different timelines for a complete return to normal crude flows.

The variation in those timelines left uncertainty around the full recovery of the pipeline. Even so, expectations that a significant portion of capacity could return within days were enough to soften some of the supply anxiety that had pushed crude toward four month highs.

Developments in China also added another supply related element to the market. Chinese exports of refined oil products increased by 12.7% year on year in August, while customs data showed that the country’s jet fuel exports reached a record high.

Expectations remained that China could further relax its controls on exports during September. The increase in refined product shipments came as markets continued to track both crude supply risks in the Middle East and potential changes in product availability from China.

Elsewhere, Iran’s Revolutionary Guards Navy reported that an oil tanker flagged in Togo had caught fire after being struck in the Strait of Hormuz. Iranian state media described the tanker’s movement through the waterway as an “illegal passage.”

Shipping through the Strait of Hormuz remained challenging because of the continuing conflict. The incident added another point of concern for maritime activity in a region where oil flows, export infrastructure and vessel movements were already under close scrutiny.

The broader tensions in the Middle East were set to be discussed at the upcoming UN General Assembly. The US State Department said an Iranian delegation was expected to attend, while crude markets remained focused on Saudi pipeline restoration efforts and the condition of regional shipping routes.