Oil falls as US crude inventories rise despite Saudi supply concerns

Oil prices dipped on Wednesday following a surprise increase in U.S. crude inventories, as investors evaluated the potential impact of supply risks stemming from Saudi Arabia's suspension of oil loadings at its Yanbu port. Brent crude futures slipped by 93 cents, or 0.86%, to $107.82 per barrel, while U.S. West Texas Intermediate futures dropped by 97 cents, or 0.92%, to $104.86 per barrel.

Both benchmarks ended more than $3 higher and at their highest levels since May 19, with the suspension of the Yanbu loading exacerbating supply concerns and Saudi Arabia reducing oil shipments to Europe and the U.S. Crude oil, gasoline, and distillate inventories all surged last week, according to market sources. Crude inventories surged by 7.1 million barrels over the week ending on September 11, surpassing analysts' expectations for a decrease of approximately 1.6 million barrels.

Unexpected builds in gasoline and diesel inventories have negatively affected prices, but regional stock increases do not alter the tightness in the global crude market, as per Haitong Futures. Saudi Arabia halted oil loading at Yanbu port following an attack by Yemen's Iran-aligned Houthis on the East-West pipeline, which reroutes around 4 million barrels or about 4% of global supply daily to the Red Sea port.

The U.S. energy secretary indicated that crude should resume flowing through the Saudi pipeline within days, although estimates on the pipeline's downtime varied, with some predicting repair completion in five to six weeks, and others suggesting partial pumping could resume sooner as repairs continue. Meanwhile, unrelated to the Iran conflict, Libya's National Oil Corporation (NOC) reported that operations were suspended at three oil fields after protesting members of the Petroleum Facilities Guard shut down a valve on the Hamada-Zawiya crude export pipeline.

Despite the shutdowns, Libya's oil production has not been significantly impacted and remains at around 1.4 million barrels per day, as stated by NOC Chairman Massoud Suleman.