Oil Prices Slide as Saudi Pipeline Repairs Ease Supply Fears

Oil prices settled lower on Thursday, extending the previous session’s losses, as signs that Saudi Arabia is normalizing exports and repairing damaged infrastructure eased fears of a long-term supply deficit.

Brent crude futures closed down $1.01, or 0.95%, at $104.82 a barrel. US West Texas Intermediate futures fell 52 cents, or 0.5%, to $101.91 a barrel. Both benchmarks had fallen about 3% on Wednesday, and earlier in Thursday’s session Brent dropped over $3 to its lowest since Sept. 10 while WTI also fell more than $3 before recovering.

The decline was driven by reports that Saudi Arabia is offering more crude cargoes to Asian refiners through ship-to-ship transfers off Oman’s Sohar port, bypassing the blocked East-West pipeline. Saudi Arabia is seeking to restore about half the capacity of that pipeline within days, after drone attacks halted the link last week, according to Bloomberg, as cited by the Business Times. The 750-mile pipeline, which carries as much as 7 million barrels per day (bpd) from the Persian Gulf to the Red Sea, was shut on Sept. 11 as a precaution after attacks by Yemen’s Iran-backed Houthis.

US Energy Secretary Chris Wright said on Wednesday that 18 million barrels of crude and refined products passed through the Strait of Hormuz on Tuesday, the Nasdaq reported, helping to calm supply concerns.

“Oil prices extended the previous session’s losses on Thursday as concerns over Middle East supply disruptions eased to some extent,” said Christopher Tahir, senior market strategist at trading platform Exness, as quoted by the Business Times. He cited increased crude flows through additional offshore loadings via Oman and efforts to restore the East-West pipeline. “Nevertheless, the physical market remains tight, limiting the scope for further declines.”

Macroeconomist Artem Loginov, writing for Pravda, said the previous weekly surge was driven by panic buying and characterized the current dip as a technical alignment rather than a shift in the global trend. Market analyst Gennady Chernov, also cited by Pravda, said Saudi Arabia’s increased shipments via alternative terminals outside the Strait of Hormuz reduce dependence on vulnerable corridors and signal supply-chain resilience.

Despite the easing, several factors limit the downside. Risk manager Ilya Gusev, as reported by Pravda, said current prices include a geopolitical premium for political instability and do not reflect a simple balance of supply and demand. “Any new incident could trigger a sharp price spike,” he warned.

The Houthis have captured territory near the Bab-al-Mandeb Strait, strengthening their ability to attack Red Sea shipping, the Nasdaq reported. Diesel markets are also tightening: European gasoil futures and US ultra-low-sulfur diesel futures both settled at record highs on Tuesday, according to the Business Times, as Ukrainian drone attacks damaged a Russian refinery.

Singapore’s DBS Bank said its base-case scenario for the fourth quarter assumes US-Iran tensions will ease, allowing Brent to stabilize in an $85-to-$95 range, the Business Times reported. Meanwhile, the International Energy Agency warned last week that high oil prices and restricted supply will cause the biggest drop in global oil demand since the Covid-19 pandemic, but raised its estimate for this year’s global oil deficit to 1.7 million bpd, according to the Nasdaq.

The Organization of the Petroleum Exporting Countries’ crude production fell by 900,000 bpd in August to 19.91 million bpd, the Nasdaq reported, as the planned OPEC+ output increase may be difficult to achieve amid ongoing military attacks.

Analysts cautioned that the supply picture remains fragile.