Oil Prices Drop, But Threats Persist

Oil prices closed lower in Thursday's trading (Sept. 17) but remained above US$100 per barrel. Brent fell US$1.01, or 0.95%, to US$104.82 per barrel, while West Texas Intermediate (WTI) declined US$0.52, or 0.5%, to US$101.91. These drops extended the approximately 3% decline both contracts experienced on Wednesday.

Early in the session, both Brent and WTI slumped by more than US$3, hitting their lowest levels since September 10 and 11, respectively. Pressure mounted following reports that Saudi Arabia was offering additional oil to Asian refineries via ship-to-ship transfers off the coast of Sohar Port, Oman. This alternative route could potentially replace some of the shipments disrupted by the attack on the East-West pipeline.

Hopes for a supply recovery were also bolstered by plans to restart the pipeline. Bloomberg reported that Saudi Arabia is working to restore about half of the East-West line's capacity within a few days. The pipeline, which transports oil to the Red Sea coast, had been shut down after being targeted by a drone attack last week.

However, security risks continue to loom over the market. Saudi Arabia and the Iran-backed Houthi group exchanged cross-border attacks again on Thursday. The escalation of the conflict into Yemen and Saudi Arabia threatens to worsen the global energy supply disruptions that have persisted since the US and Israeli attacks on Iran in February.

Earlier this week, oil prices had neared four-month highs after shipping industry sources reported a halt in oil loading at Yanbu, a key Saudi export hub on the Red Sea. Riyadh also reportedly cancelled some shipments to European customers. Yanbu's reliance on the East-West pipeline makes the restoration of that line a critical factor for the smooth flow of Saudi exports.

According to a Newsmaker analysis, the oil market is currently weighing the prospect of additional supplies against the threat of new disruptions. The narrowing of price declines toward the close suggests that supply concerns are still tempering selling pressure. If shipments via Oman and the East-West recovery proceed as planned, prices could weaken again. Conversely, further attacks on energy facilities or shipping routes could hinder the export recovery and drive oil prices back up.

Source: Newsmaker.id