Oil drops as Saudi Arabia ramps up flows through key pipeline
The kingdom is said to have restored about half the capacity of its East-West pipeline after attacks
Saudi Arabia has increased oil production by restoring about half the capacity of its East-West pipeline following drone attacks, causing oil prices to drop below US$103 a barrel. The pipeline plays a crucial role in bypassing the Strait of Hormuz, which was disrupted by the Middle East conflict. Despite ongoing risks to shipping, crude oil continues to flow through the Persian Gulf to vessels transiting covertly.
This increased flow is helping to ease concerns about a deal to reopen the waterway remaining elusive. US President Donald Trump is releasing up to 40 million barrels from the nation's emergency reserve, further pressuring prices on Tuesday. The US administration's actions, along with the restored pipeline capacity, are providing some supply relief to the market.
However, the question remains about the impact on Iran, as its diminished leverage over Hormuz could prompt either a negotiation or escalation to regain that leverage. The Brent futures contract, which is near the triple digits, is just a day away from expiry on Wednesday, and the more active December futures settled near US$96.
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