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

Oil prices continued their downward trend on Thursday, further eroding gains from the previous day as fears of Middle East supply disruptions abated. Brent crude futures slipped $1.24, or 1.2%, to $104.59 a barrel, while US West Texas Intermediate futures declined $1.14, or 1.1%, to $101.29. These drops followed a $3 dip on Wednesday.

Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, attributed the easing of supply worries to reports that Saudi Arabia would ship additional crude via Oman. He also noted that hopes of tension easing in the Middle East ahead of the upcoming US-China summit were curbing price gains. Saudi Arabia announced it would transfer more crude oil to Asian refiners via ship-to-ship movements off Oman's Sohar port, mitigating some of the supply impact from attacks on the Saudi East-West pipeline leading to the Red Sea.

Oil had surged to near four-month highs earlier in the week following reports that the Saudi Red Sea export hub of Yanbu had halted crude loadings and canceled shipments to European customers following pipeline attacks. The pipeline, which became the main Saudi outlet for oil after Iran blocked the Strait of Hormuz, has faced damage to two pumping stations, though repair timelines remain unclear.

Despite the price drop, concerns over the escalating Middle East conflict persisted, with Saudi airstrikes in Yemen and Houthi missile and drone attacks on Saudi cities reported on Wednesday. The EIA also noted a smaller-than-anticipated drawdown in US crude inventories, with stocks falling 640,000 barrels last week, less than the predicted 1.62 million-barrel reduction.