Key Moments
- Brent crude futures declined by $2.14, or 2%, to $102.68 a barrel, while U.S. West Texas Intermediate slipped $1.83, or 1.8%, to $100.08 by 0806 GMT.
- Saudi Arabia’s use of alternative export routes, rising product inventories in key hubs, and higher Chinese fuel exports have eased immediate supply tightness concerns.
- Despite continued geopolitical tensions in the Middle East, including attacks near Saudi Arabia and the Strait of Hormuz, markets have reduced the geopolitical risk premium.
Oil Prices Extend Losses
Oil futures fell for a third consecutive session on Friday, with traders scaling back risk premiums tied to potential supply disruptions from Saudi Arabia. The pullback came even as worries persisted that conflict in the Middle East could broaden.
| Contract | Price | Move | Percentage Change | Time (GMT) |
|---|---|---|---|---|
| Brent crude futures | $102.68 | – $2.14 | – 2% | 0806 |
| U.S. West Texas Intermediate (WTI) futures | $100.08 | – $1.83 | – 1.8% | 0806 |
Benchmark Brent contracts are on pace for their first weekly decline after two weeks of gains.
Supply Fears Ease on Alternative Flows and Stock Builds
Concerns about near-term supply have moderated, supported by several factors including increased Saudi crude volumes moving via Oman, rising oil product inventories in the United States, Singapore and Europe, and stronger fuel exports from China, according to PVM Oil Associates analyst Tamas Varga.
Varga said, “While continuous pre-weekend profit-taking cannot be ruled out, the current fundamental outlook would not justify a prolonged fall below $100 (a barrel) basis Brent.”
Geopolitical Risks Persist but Market Reaction Softens
Market participants showed limited reaction even as tensions intensified between Saudi Arabia and Yemen’s Iran-backed Houthi forces, who exchanged new cross-border strikes on Thursday, widening the theater of conflict in the region.
Earlier in the week, prices had approached four-month highs after sources reported that crude loadings at Saudi Arabia’s Red Sea export terminal of Yanbu were halted and that Riyadh had canceled some shipments to Europe following damage to its East-West pipeline in an attack last week.
Prices have since retreated amid reports that Saudi Arabia aims to restore about half of the East-West pipeline’s capacity within days. Sources speaking to Reuters have provided differing indications on how long it will take to fully reopen the line and normalize crude flows.
China’s Fuel Exports Add to Supply Comfort
Chinese exports of refined oil products in August rose 12.7% year on year, with jet fuel shipments reaching a record high, customs data showed on Friday. China is expected to further relax export restrictions in September, positioning itself to benefit from stronger margins in overseas markets.
Priyanka Sachdeva, head of market insights at Phillip Nova, said, “The key question is whether physical flows can normalise and what the timeline could be. If we see a sustained improvement in Hormuz traffic, some of the geopolitical premium can unwind further.”
Strait of Hormuz Remains a Flashpoint
Despite some easing of supply concerns, transport risks in the region remain elevated. Iran’s Revolutionary Guards Navy said that a Togo-flagged oil tanker was hit while attempting to make “illegal passage” through the Strait of Hormuz on Thursday, Iranian state media reported early on Friday.
The article noted that the United States and Iran have not held peace talks since the breakdown of an interim agreement reached in June. The ongoing war is expected to be discussed at the United Nations General Assembly next week, with an Iranian delegation allowed to attend, according to the U.S. State Department.
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