Key Points
- Brent crude fell about 0.7 per cent over the week to $103.87 a barrel
- West Texas Intermediate ended at $100.30, up about 0.2 per cent
- Saudi Arabia increased efforts to route crude exports through Oman
- Limited oil flows through the Strait of Hormuz continued to keep a geopolitical premium in prices
ISLAMABAD: Oil prices ended the week mixed after an early surge triggered by concerns over Saudi export disruptions gave way to three consecutive sessions of declines as alternative supply routes eased immediate fears of a major shortage.
Brent crude, the international benchmark, settled at $103.87 a barrel on Friday, down 0.95 per cent on the day and about 0.7 per cent from the previous week. US West Texas Intermediate crude fell 1.61 per cent on Friday to $100.30, but remained about 0.2 per cent higher on the week.
Weekly decline in Brent price followed the two weeks’ gains during which the benchmark had risen sharply on concerns that attacks on energy infrastructure and restricted shipping through the Strait of Hormuz could choke large volumes of crude supply chain.
Oil supply disruption
The week began with oil prices rising after Saudi Arabia’s East-West Pipeline was damaged in an attack, restricting one of the kingdom’s main routes for moving crude from its eastern oil fields to the Red Sea port of Yanbu.
The 1,200-kilometre pipeline has been a particularly important alternative during the Iran conflict because shipping through the Strait of Hormuz has been severely disrupted.
Reports said the damaged section could remain largely out of service for several weeks.
Brent approached $110 a barrel on Monday as traders assessed the potential loss of Saudi export capacity and increased risks to Middle Eastern oil flows.
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The market mood changed later in the week after Saudi Arabia offered additional crude cargoes through Oman, providing an alternative route for some exports.
The development reduced immediate concerns that the pipeline damage would translate into a prolonged shortage of internationally traded crude.
US oil inventories
US oil inventories also influenced prices during the week.
Data from the US Energy Information Administration showed commercial crude inventories, excluding the Strategic Petroleum Reserve, fell by 0.6 million barrels to 423.4 million barrels in the week ended September 11. The stockpile remained about 1 per cent above the five-year average for the period.
The official data followed an industry estimate of a much larger 7.1-million-barrel increase that had initially put pressure on oil prices. The smaller official decline meant the inventory picture provided less downward pressure than the earlier estimate suggested.
Gasoline inventories increased by 0.8 million barrels, while distillate stocks rose by 1.6 million barrels, according to the Energy Information Administration.
Strait of Hormuz remains key risk
Despite the weekly decline, the oil market remained far from normal.
The Strait of Hormuz, the narrow waterway between Iran and Oman through which a major share of global oil shipments normally passes, continued to see sharply reduced traffic because of the Iran conflict.
Tanker tracking data cited by Oil & Gas Journal indicated that about 10 million barrels per day moved through the strait during the week, compared with roughly 17 million to 20 million barrels per day before the conflict.
That reduction has kept a substantial geopolitical premium in crude prices even when other supply concerns have eased.
The market therefore remained highly sensitive to developments involving Iran, Saudi Arabia, Yemen and shipping through the Strait of Hormuz and the Bab el-Mandeb waterways.
Three-day price decline
Oil prices fell for a third consecutive session on Friday as concerns about Saudi supply disruptions eased.
Increased Saudi crude shipments through Oman, higher petroleum product inventories in several major markets and stronger Chinese fuel exports helped reduce immediate fears of a severe supply shortage.
The week’s price action showed how quickly crude markets are responding to changes in expectations about physical supply. Early fears over Saudi export disruptions lifted prices sharply, while evidence of alternative export routes brought them back down.
