Key Takeaways
- Oil prices fell slightly, staying above $100 per barrel.
- Saudi Arabia offered extra crude cargoes through Oman, easing supply concerns.
- Middle East tensions remain, keeping prices from significant drops.
Oil prices eased in Asian trade on Thursday, extending losses but remaining above $100 per barrel. Brent crude futures dropped 19 cents, or 0.2%, to $105.64 a barrel by 0347 GMT, while US West Texas Intermediate futures were down 33 cents, or 0.3%, at $102.10.
The reduction in oil prices was attributed to reports that Saudi Arabia would ship cargo via Oman, which reduced fears of supply disruptions. Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, noted, 'Concerns over supply tightness eased slightly following news that Saudi Arabia would ship cargo via Oman.'
However, the easing of supply concerns was only partial, as some analysts expected these flows to only partially offset the supply loss from the kingdom’s Red Sea port. The pick-up in flows through the Strait of Hormuz is only partly offsetting lost export barrels following drone attacks that shut down the Saudi Arabia’s East-West pipeline.
The suspension of crude loadings at Saudi Arabia’s Red Sea export hub of Yanbu and the cancellation of some cargo deliveries to European customers earlier this week contributed to the initial rise in oil prices. The suspension followed attacks on the East-West pipeline, which feeds the Saudi port of Yanbu.
Prior to the war, 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 unclear, according to assessments from three oil and security sources.
Despite the oil price decline on Thursday, concerns about the intensifying Middle East conflict remain. Saudi warplanes pounded Yemen and Houthi fighters launched drones and missiles at Saudi cities, the Iran-backed movement said on Wednesday, after a lightning advance that has extended Tehran’s reach in the Middle East war.
Singapore’s DBS Bank assumes in its base case scenario for the fourth quarter that the US war with Iran will dial down, and Brent will stabilise in the $85 to $95 range. However, under the bear case scenario currently prevailing, with attacks and incidents in Hormuz and Red Sea continuing, prices could spike towards $120 per barrel before potentially normalising back towards $100 per barrel.
Concerns over supply tightness eased slightly following news that Saudi Arabia would ship cargo via Oman.
Hiroyuki Kikukawa, Chief Strategist of Nissan Securities Investment
However, under the bear case scenario currently prevailing, with attacks and incidents in Hormuz and Red Sea continuing, prices could spike towards $120/bbl levels before potentially normalising back towards $100/bbl.
Suvro Sarkar, Head of Energy Research, DBS Bank
