RIYADH, Sept 17 — Oil prices eased about 3 per cent today to a one-week low, extending losses as reports of additional Saudi crude cargoes through Oman eased supply concerns, though prices stayed above US$100 a barrel on fears the West Asian conflict could widen.
Brent crude futures were down US$3.11, or 2.94 per cent, to US$102.72 a barrel at 1324 GMT, after touching their lowest level since September 10, while US West Texas Intermediate futures were down US$1.96, or 1.91 per cent, at US$100.47 a barrel, their lowest level since Sept. 11. Both contracts fell about US$3 yesterday.
Crude retreated from weekly highs after US Energy Secretary Chris Wright signalled a quicker return to service for Saudi Arabia’s East-West pipeline, while Saudi efforts to maintain shipments via additional loadings off Oman eased supply worries, said Tim Waterer, chief market analyst at KCM Trade.
Saudi Arabia is offering more crude cargoes to Asian refiners through ship-to-ship transfers off Oman’s Sohar port, people familiar with the matter said, helping offset some of the disruption caused by attacks on the East-West pipeline to the Red Sea.
Oil prices had climbed to around four-month highs earlier this week after shipping industry sources said 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 supplies Yanbu.
Traders say a prolonged closure of the pipeline could cut off as much as 4 per cent of global oil supply. Saudi Arabia has not said when operations might resume, but Wright told CNBC on Tuesday that crude should be flowing through the pipeline within days.
Supply risks persist
Despite today’s decline in oil prices, concerns about the escalating West Asian conflict remain.
Two pumping stations serving the East-West pipeline were damaged in an attack last week, and the repair timeline remains unclear, according to assessments from three oil and security sources.
Singapore’s DBS Bank said its base-case scenario for the fourth quarter assumes tensions between the US and Iran will ease, allowing Brent to stabilise in an US$85 to US$95 a barrel range.
Diesel market feels the squeeze
While crude supply disruptions remain the market’s main concern, tightening diesel supplies have emerged as another source of pressure as disruptions to energy infrastructure in West Asia and Russia constrain fuel availability.
European gasoil futures, a benchmark for diesel prices, settled at a record high on Tuesday. US ultra-low sulfur diesel futures also settled at a record high.
“Product tightness could easily become a bigger issue than crude supply itself in the near term, especially with Russian refining capacity also constrained,” Waterer said.
A Ukrainian drone attack damaged a refinery in the Russian city of Yaroslavl, causing a fire that was later extinguished, regional Governor Mikhail Yevrayev said today.
Goldman Sachs said in a note that concerns over diesel shortages and the resulting price rally had encouraged refiners to prioritise diesel production over gasoline.
