Crude oil prices were on course for a weekly decline after a three-week series of gains, as traders’ fears about Saudi Arabia’s ability to continue exporting oil appeared to have been quelled by reports about ship-to-ship transfers in the Gulf of Oman.
At the time of writing, Brent crude was trading at $103.65 per barrel, with West Texas Intermediate at $101.04 per barrel, both set for a modest loss. However, it bears noting that both remain above $100 per barrel, which keeps the pressure on end fuel prices that are frustrating drivers and making governments nervous.
Fears about Saudi oil exports arose after the Yemeni Houthis attacked the East-West pipeline that carried Saudi oil to the Red Sea, and from there to global markets. Saudi Arabia has relied heavily on the pipeline since the war began, moving roughly 4 million to 5 million bpd through the system during the past six months. Now, this is temporarily gone, and there is only a limited amount of supply in tanks at the port of Yanbu.
Because of this, Saudi Arabia earlier this week canceled several cargoes of crude that were supposed to be shipped to Europe. This deepened concerns but not for long, after reports emerged that Aramco had switched to the Persian Gulf, moving the oil out via ship-to-ship transfers off the coast of Oman, in the Gulf of Oman, which is outside the Strait of Hormuz.
Reports about Aramco expecting to restore half of the daily flows via the East-West pipeline also contributed to the shift in trader mood, even though the global shortfall will not disappear if Aramco starts pumping 2 to 2.5 million barrels daily via the pipe.
“The key question is whether physical flows can normalise and what could be the timeline. If we see a sustained improvement in Hormuz traffic, some of the geopolitical premium can unwind further,” Phillip Nova analyst Priyanka Sachdeva said, as quoted by Reuters.
By Irina Slav for Oilprice.com
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