Global oil prices are heading for a weekly decline, snapping a three-week run of gains, as concerns over Saudi Arabia’s ability to keep exporting crude have eased.
At the time of writing, Brent crude was trading at $103.65 per barrel and West Texas Intermediate at $101.04 per barrel. Both benchmarks were set for a modest weekly loss, although they remained above $100 a barrel, keeping pressure on retail fuel prices and adding to government anxiety.
Export concerns intensified after Yemen’s Houthis attacked the East-West pipeline, which Saudi Arabia had used to move oil to the Red Sea and from there to global markets. Over the past six months, the kingdom had been shipping roughly 4 million to 5 million barrels per day through that system. The route is now temporarily unavailable, while supplies stored in tanks at the port of Yanbu are limited.
As a result, Saudi Arabia earlier this week canceled several crude cargoes that had been scheduled for Europe, briefly deepening market worries. Those fears then faded after reports said Aramco had shifted to an alternative route, moving oil out through the Persian Gulf and using ship-to-ship transfers off Oman’s coast in the Gulf of Oman, outside the Strait of Hormuz.
Trader sentiment was also supported by reports that Aramco expects to restore about half of the daily flows through the East-West pipeline. Even so, the global supply shortfall would not disappear entirely if the company resumes pumping 2 million to 2.5 million barrels a day through the line.
Reuters quoted Phillip Nova analyst Priyanka Sachdeva as saying: “The key question is whether physical flows can normalise and what could be the timeline. If we see a sustained improvement in Hormuz traffic, some of the geopolitical premium can unwind further.” The comment underlines that the market is now focused on how quickly physical flows can recover and whether shipping traffic through Hormuz continues to improve.
