Oil Market Under Pressure as Middle East Supply Concerns Recede

Oil prices eased further in Asian trade on Thursday, extending losses after reports that Saudi Arabia is offering extra crude cargoes through Oman, easing some fears of supply disruption, though prices remained above 100 dollars a barrel on lingering concerns the Middle East conflict could widen.

Brent crude slipped 0.2 percent to 105.64 dollars a barrel, while US crude eased 0.3 percent to 102.10 dollars, building on roughly three-dollar declines for both contracts on Wednesday. Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, said concerns over supply tightness eased slightly after news that Saudi Arabia would ship cargo via Oman, adding that expectations of progress toward easing regional tensions ahead of next week’s US-China summit are also helping cap price gains.

Saudi Arabia is offering additional crude loadings to Asian refiners through ship-to-ship transfers off Oman’s Sohar port, according to people familiar with the matter, a move aimed at softening the blow from recent attacks on the kingdom’s East-West pipeline to the Red Sea. Still, some analysts expect those flows to offset only part of the lost supply from Saudi Arabia’s Red Sea export hub, limiting how far prices can fall. Saxo Bank analysts noted that the pickup in flows through the Strait of Hormuz is only partly offsetting lost export barrels following drone attacks, referring to the strikes that shut down the pipeline.

Prices had climbed to roughly four-month highs earlier this week after shipping industry sources said crude loadings at Saudi Arabia’s Red Sea port of Yanbu had been suspended and Riyadh had canceled some cargo deliveries to European customers, following attacks on the pipeline that feeds the port. Yanbu became Saudi Arabia’s primary export outlet after Iran began blockading the Strait of Hormuz in response to US and Israeli strikes at the end of February. Before the war, Hormuz carried roughly a fifth of the world’s oil supply.

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