Oil prices fall 1% on hopes of limited supply disruptions

On September 18, oil prices fell by approximately 1%, continuing a downward trend for the third consecutive day, but remained above $100 per barrel, according to wire material. Brent crude futures dropped $1.01, or 1%, to $103.77 a barrel, while US West Texas Intermediate futures decreased $1.03, or 1%, to $100.88 a barrel. Both benchmarks had fallen about 1% on Thursday.

Despite concerns about potential supply disruptions, markets largely disregarded the situation, even as Saudi Arabia and Iran-backed Houthis carried out fresh strikes near their border, expanding the conflict in West Asia. Earlier this week, oil prices had surged to near four-month highs as sources indicated that crude loadings at Saudi Arabia's Red Sea export hub of Yanbu had been halted and Riyadh had canceled some deliveries to Europe following damage to its East-West pipeline in an attack the previous week.

The extent of the pipeline's reopening time frame remains uncertain, with estimates varying among those who have spoken to Reuters. Three of the pipeline's pumping stations were damaged, according to satellite imagery and industry sources. A prolonged shutdown of the pipeline to Yanbu could potentially cut off up to 4% of global oil supply, traders have suggested.

Saudi Arabia is reportedly aiming to restore a portion of the East-West pipeline's capacity within days following the recent drone attacks. Additionally, Saudi Arabia is offering more crude cargoes to Asian refiners via ship-to-ship transfers off Oman's Sohar port, which could help mitigate some of the disruption caused by the attacks on the East-West pipeline.

US Energy Secretary Chris Wright asserted that the pipeline should resume operations within a few days. The uncertainty surrounding the situation was further highlighted by Iran's Revolutionary Guards Navy claiming that a Togo-flagged oil tanker was attacked while attempting to illegally pass through the Strait of Hormuz on Thursday, as per Iranian state media reports early on Friday.

The US and Iran have not held peace talks since the interim agreement reached in June fell apart within weeks, and the conflict is expected to be discussed at the upcoming United Nations General Assembly, where an Iranian delegation will be allowed to attend, according to the US State Department.