Oil falls 1% as investors watch Middle East supply disruptions

Oil prices experienced a 1% decline on Thursday, settling at a rate of around $104.82 per barrel for Brent crude and $101.91 for US West Texas Intermediate, according to wire material. The drop in prices was influenced by investor deliberations on the impact of strikes by Saudi Arabia and Iran-backed Houthis, as well as reports of potential additional Saudi crude barrels reaching global markets to alleviate supply concerns.

These attacks on the Middle East, including Saudi Arabia and Yemen, have raised fears of further escalating the global energy supply shortage that began following the United States and Israel's attack on Iran in February.

Further complications arose when Saudi Arabia offered more crude cargoes to Asian refiners through ship-to-ship transfers off Oman's Sohar port, which helped to offset some of the disruptions caused by the sabotage of the East-West pipeline to the Red Sea. Saudi Arabia was also working to restore about half the capacity of its East-West oil pipeline within a few days following its suspension following drone attacks.

While the pipeline supplies Yanbu, the Red Sea export hub of Saudi Arabia, traders suggested that a prolonged closure of the pipeline could potentially cut off up to 4% of global oil supply.

Although oil prices had risen to near four-month highs earlier in the week due to concerns over restricted pipeline exports, tensions between Saudi Arabia and the Houthis, as well as further disruptions to the Strait of Hormuz, have created an environment of persistent exposure to potential further supply interruptions. Market strategist Christopher Tahir from Exness noted that oil prices had continued to fall on Thursday as some of the supply concerns eased, but stressed that the physical market remained tight, limiting the potential for further price declines.