Oil prices fall despite persistent Middle East risks

Highlights

Brent fell 1.54% and WTI declined 0.58%.
Brent is heading for its first weekly loss in three.
Saudi supply concerns have eased as more crude moves via Oman.
Chinese refined-product exports rose 12.7% in August.

Brent crude futures fell 1.54% to $103.21 a barrel, while U.S. West Texas Intermediate futures declined 0.58% to $101.32. Prices extended their retreat as additional Saudi crude moved through Oman and expectations grew that part of the damaged East-West pipeline could return to service within days, Reuters reported.

Saudi supply fears lose some influence

Brent had approached four-month highs earlier in the week after crude loadings at Saudi Arabia's Red Sea export hub at Yanbu were suspended and some deliveries to Europe were canceled following an attack on the East-West pipeline.

That pressure has since eased. Saudi Arabia has made additional crude available through ship-to-ship transfers near Oman's Sohar port, while efforts are underway to restore roughly half of the pipeline's capacity. Estimates for a complete return to normal operations remain uncertain.

More available refined products have also reduced immediate concerns about tight energy supplies. Global product inventories increased by 3.7 million barrels last week, with gains concentrated in Western markets and Singapore.

China added another source of supply. Its refined-product exports increased 12.7% from a year earlier in August, while jet-fuel exports reached a record. Further easing of Chinese export controls in September could allow refiners to take advantage of stronger international margins.

Regional risks keep a floor under the market

The retreat in prices has not eliminated geopolitical risk. Saudi Arabia and Yemen's Iran-backed Houthis exchanged fresh strikes across their border on Thursday, widening the regional conflict even as oil traders focused more heavily on improving supply conditions.

Shipping through the Strait of Hormuz, one of the world's most critical maritime energy corridors, also remains severely constrained. Only four commodities vessels crossed on Thursday, compared with a 10-day average of about 16. Some vessels may not appear in shipping data because operators can disable transponders while navigating conflict zones.

The contrast explains why oil has declined without experiencing a deeper selloff. Despite three consecutive days of declines, Brent and WTI crude oil prices remain above $100 a barrel. The next direction will depend heavily on how quickly Saudi pipeline operations and regional shipping flows normalize, while inventories and Chinese exports provide additional supply to the market.

As we previously reported, President Donald Trump said he hoped the war with Iran was approaching an end even as the conflict expanded further into Yemen and Saudi Arabia.

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