Oil prices fall as Saudi Arabia reportedly offers more crude via Hormuz after pipeline attack

Oil prices fell Thursday as Saudi Arabia shifts some crude exports through the Strait of Hormuz to compensate for the closure of a key pipeline, easing market fears that the outage will cause another major disruption to global supplies.

Brent futures, the international benchmark, traded 2.6% lower at $103.05 per barrel. West Texas Intermediate crude briefly dipped below $100. The U.S. benchmark was last down 1.8% to $100.55. U.S. crude oil has erased most of its gains for the week but is up 17% for the month.

The Saudis are making additional crude cargoes available to Asian refiners through ship-to-ship transfers just outside Hormuz near Oman’s Sohar port, Reuters reported, citing sources familiar with the matter.

Saudi crude loadings at its Mideast Gulf ports are up so far this month, said Matt Smith, director of commodity research at Kpler. And ship transfers in the Gulf of Oman have risen to 2.7 million barrels per day compared to 1.5 million bpd in August, Smith said. But it is difficult to know whether the Saudis or other Gulf states are behind those transfers, he said.

Earlier this week, crude loadings at the Red Sea export terminal at Yanbu were halted and Riyadh canceled some shipments to European customers, industry sources told Reuters.

Yanbu has become Saudi Arabia’s key route for oil exports since Iran began blockading the Strait of Hormuz following U.S. and Israeli attacks on the country in late-February. 

U.S. Energy Secretary Chris Wright told CNBC Tuesday that the East-West pipeline outage was a “brief and temporary interruption” that “will be measured in days.” Riyadh has taken “quick action” to export more oil through Hormuz with the help of the U.S. military, Wright said.

Rapidan Energy expects Saudi crude oil exports to fall by 400,000 barrels per day this month due to the pipeline outage. But lower shipments from Yanbu should be partly offset by higher exports through Hormuz, the Rapidan said.

“Risk remains skewed toward a larger disruption if the pipeline outage extends past September or Iran, the Houthis, or other proxy groups escalate attacks,” Rapidan told clients in a Thursday note.