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Middle East supply disruption worries ease as oil falls to a one-week low of 2%

Prices fell by 2% to a new low on Thursday, easing supply concerns. However, prices remain above $100 per barrel due to fears that the Middle East conflict may worsen.

Brent crude futures fell $2.67 or 2.5% to $103.13 per barrel at 12:03 pm. After reaching their lowest level since October 10, ET (1603 GMT) has now reached its highest level. US West Texas Intermediate futures fell $1.61 or 1.6% to $100.82 per barrel, the lowest level since September 11. Both contracts dropped about $3 on Wednesday.

Tim Waterer is the chief analyst at KCM Trade. He said that crude oil prices fell from their weekly highs as US Energy Secretary Chris Wright announced a faster return to service of Saudi Arabia's East West pipeline. Saudi efforts to maintain shipments through additional loadings in Oman also eased supply concerns.

People familiar with the matter have confirmed that Saudi Arabia offers more crude cargoes via ship-to-ship transfers from Oman's Sohar Port to Asian refiners. This will help offset the damage caused by the attacks on the East West pipeline to the Red Sea. Saudi Arabia also wants to restore about half of the capacity of the East-West oil pipe within days, after it was shut down last week due to drone attacks.

This week, oil prices reached their highest levels in four months after sources from the shipping industry reported that crude loadings had been suspended at Saudi Arabia's Red Sea export hub of Yanbu and Riyadh canceled certain cargo deliveries to European clients. Yanbu is supplied by the East-West pipeline.

A prolonged shutdown of the pipeline, traders said, could affect up to 4% of world oil supplies. Saudi Arabia hasn't said when it might resume operations, but Wright told CNBC Tuesday that crude oil should flow through the pipeline in a few days.

Oil prices continued to fall on Thursday, as concerns about Middle East supply disruptions subsided to a certain extent, said Christopher Tahir Senior Market Strategist, trading platform Exness. He cited?increased oil flows via additional offshore loadings through Oman, and efforts to restore East-West pipeline.

"Despite this, the physical market is still tight and limits the potential for further declines." The Strait of Hormuz tanker traffic continues to decline, and tensions between Saudi Arabia and Houthis threaten to disrupt Red Sea shipping as well as regional energy infrastructure.

According to three oil and security sources, the timeline for repair is unclear. Three pumping stations serving the East-West Pipeline were damaged in an attack that occurred last week.

Singapore's DBS Bank stated that its base-case scenario assumes that tensions between Iran and the US will ease. This would allow Brent to stabilize in a range of $85 to $95.

DIESEL MARKET ?FEELS THE SQUEEZE

As disruptions in energy infrastructure across the Middle East and Russia constrain fuel supply, diesel shortages have become a major concern.

The European Gasoil Futures, which is a benchmark for diesel prices, reached a new record on Tuesday. US ultra-low sulfur diesel contracts also reached a new record high.

On Thursday, Mikhail Yevrayev, the regional governor, said that a Ukrainian drone attacked a refinery located in Yaroslavl. The attack caused a fire, which was extinguished later.

(source: Reuters)