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

Oil prices continued to decline on Thursday, following yesterday's downward trend, due to reports suggesting that Saudi Arabia would provide additional crude shipments through Oman. Brent crude futures slipped $1.24, or 1.2%, to $104.59 a barrel, while U.S. West Texas Intermediate futures dropped $1.14, or 1.1%, to $101.29. These declines occurred after a $3 decrease on Wednesday.

Hiroyuki Kikukawa, chief strategist at Nissan Securities, noted that the concerns over supply tightness had eased slightly following Saudi Arabia's announcement of cargo transfers via Oman. He also mentioned that expectations of progress in easing tensions in the Middle East, ahead of the U.S.-China summit, were also helping to cap price gains.

Saudi Arabia has been offering more crude oil loadings to Asian refiners through ship-to-ship transfers off Oman's Sohar port, which helps alleviate some of the impact on global supply following attacks on the country's East-West pipeline to the Red Sea. Earlier in the week, oil prices had risen to about four-month highs after shipping industry sources reported that crude loadings at Saudi Arabia's Red Sea export hub of Yanbu had been suspended, and Riyadh had canceled some cargo deliveries to European customers.

The suspension was a result of attacks on the East-West pipeline, which serves as Saudi Arabia's primary outlet for oil exports following Iran's blockade of the Strait of Hormuz at the end of February. Prior to the war, Hormuz was responsible for one-fifth of the world's oil supply. Despite the recent price decline, concerns about escalating tensions in the Middle East persist.

On Wednesday, Saudi warplanes targeted Yemen, while Houthi fighters launched drones and missiles at Saudi cities. Iran-backed forces claimed responsibility for the attacks, following a rapid expansion of Tehran's influence in the region. Additionally, the U.S. Energy Information Administration reported a smaller-than-anticipated draw from U.S. crude inventories last week, with stocks falling by about 640,000 barrels compared to forecasts of a 1.62 million-barrel draw.