Saudi Disruptions vs. Russia-Ukraine De-escalation: A Tug-of-War for Oil Prices

Oil prices fluctuated during Tuesday's trading (Sept 15) as investors weighed supply risks stemming from the Middle East and Russia. Brent crude for November delivery rose approximately 0.3% to US$105.98 per barrel, while West Texas Intermediate (WTI) for October delivery gained 1% to reach US$102.37 per barrel.

In the Middle East, the market remains focused on Saudi Arabia's East-West pipeline, which has yet to resume operations following a shutdown caused by an attack. This route has served as a crucial alternative since tensions involving Iran disrupted shipments through the Persian Gulf. Saudi Arabia is reportedly seeking to increase shipments via the Strait of Hormuz to offset the pipeline disruption.

However, the rise in oil prices was tempered by hopes for de-escalation in the Russia-Ukraine conflict. Following US President Donald Trump's call for a halt to attacks on energy infrastructure, Turkey has stepped up mediation efforts between Moscow and Kyiv. Ukraine has expressed readiness to accept an agreement if Russia does the same, while the Kremlin has described the idea as a positive step.

Nevertheless, attacks on energy infrastructure persist. Ukraine reported striking the Syzran refinery in Russia's Volga region. Consequently, the market continues to factor in supply disruption risks, even as diplomatic prospects emerge.

Market indicators also point to tight supply conditions. The spread between near-term Brent contracts stands at around US$4.80 per barrel in a state of backwardation—a sharp increase from less than US$2 a month ago. Such a pattern typically signals strong demand for short-term supplies.

Newsmaker Analysis: Oil fundamentals remain generally bullish due to tangible infrastructure disruptions and the fact that supplies have not yet fully recovered. However, a potential Russia-Ukraine agreement could reduce the risk premium. As long as the Saudi pipeline remains disrupted and attacks on energy infrastructure continue, Brent prices are likely to remain elevated. (arl)

Source: Newsmaker.id