Oil prices extend losses as fears of Middle East supply disruptions ease

Oil prices declined in initial trading on Thursday, continuing the previous day's downturn, as reports surfaced of Saudi Arabia offering additional crude shipments through Oman, which lessened apprehensions about potential Middle East supply disruptions. Brent crude futures slipped by US$1.24, or 1.2%, to US$104.59 per barrel, while West Texas Intermediate futures decreased by US$1.14, or 1.1%, to US$101.29.

Both contracts had fallen approximately US$3 on Wednesday. Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, noted that concerns over supply tightness had eased slightly following Saudi Arabia's announcement of shipping cargo via Oman. He also mentioned that expectations of progress in easing tensions in the Middle East, ahead of the upcoming US-China summit, were contributing to price stability.

According to sources familiar with the situation, Saudi Arabia was providing extra loadings of crude oil to Asian refiners through ship-to-ship transfers off Oman's Sohar port, mitigating some of the impact on global supply from attacks on the Saudi Arabia's East-West pipeline to the Red Sea. Prices had surged to around four-month highs earlier in the week due to shipping industry reports indicating that crude loadings at Saudi Arabia's Red Sea export hub of Yanbu had been halted and Riyadh had canceled some deliveries to European consumers.

This suspension followed attacks on the East-West pipeline, which serves as the primary Saudi outlet for oil exports since Iran blocked the Strait of Hormuz following US and Israeli strikes on the country at the end of February. The Strait of Hormuz, which previously accounted for one-fifth of the world's oil supply, became vital for Saudi Arabia after the Red Sea route was disrupted.

Although oil prices dropped on Thursday, worries about the escalating Middle East conflict persisted. Saudi warplanes targeted Yemen, and Houthi fighters deployed drones and missiles against Saudi cities, according to the Iran-backed movement, which reported an ongoing advance extending Tehran's influence in the Middle East. The US Energy Information Administration reported on Wednesday that US crude inventories had declined by a smaller-than-expected amount, with a reduction of about 640,000 barrels compared to the anticipated 1.62 million-barrel draw.