Oil prices fell over a percent Friday, extending losses for a third straight session, although both benchmarks remained above $100 a barrel. Hopes that alternative routes could help Middle Eastern barrels reach global markets outweighed concerns over fresh strikes between Saudi Arabia and Yemen's Houthis.
Markets largely looked past the latest threats to supply, even as Saudi Arabia and Yemen's Iran-backed Houthis exchanged fresh strikes across their border on Thursday, widening the conflict's regional footprint.
Crude oil price on September 18
Brent crude futures fell $1.01, or 1.04%, to $103.70 a barrel, while US West Texas Intermediate futures declined $0.94, or 0.92%, to $101 a barrel. Both benchmarks had ended about 1% lower on Thursday.
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Oil prices had risen to around four-month highs earlier this week after crude loadings at Saudi Arabia's Red Sea export hub of Yanbu had been suspended. Riyadh had also cancelled some deliveries to Europe after an attack last week damaged its East-West pipeline.
According to a Reuters report, satellite imagery and three industry sources showed that three pumping stations along the pipeline had been damaged, one more than previously assessed. Traders have said a prolonged shutdown of the pipeline to Yanbu could cut off as much as 4% of global oil supply.
Bloomberg reported that Saudi Arabia was looking to restore about half of the East-West pipeline's capacity within days after the key link to the Red Sea was halted last week following drone attacks. Saudi Arabia was also offering additional crude cargoes to Asian refiners through ship-to-ship transfers off Oman's Sohar port, which could help offset some of the disruption caused by the attacks on the pipeline.
US Energy Secretary Chris Wright has said crude should start flowing through the pipeline within days.
Where are prices headed?
The uncertainty in the market was underscored by JPMorgan, which said on Thursday that it did not have a clear baseline view for oil markets for the first time since the US-Israeli war on Iran began.
The possibility of further supply disruptions has increasingly tilted the risks for oil prices to the upside. Daan Struyven, co-head of global commodities research at Goldman Sachs, said recent attacks had shown that shipping disruptions could spread and become more severe.
Goldman Sachs has outlined a scenario in which oil prices could reach as high as $120 a barrel if attacks on vessels in the Middle East intensify. If exports return to normal, the bank expects oil prices to fall back toward $80 a barrel. Struyven told Bloomberg that shipping risks had become an important driver of oil prices.
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Struyven said Goldman Sachs sees "meaningful upside to crude oil prices" and also expects natural gas and refined product prices to rise. He added that supply shocks in gas and fuels are larger than those in the crude market.
Citi has raised its average Brent crude price forecast for the third quarter to $86 a barrel from $80, citing a longer-than-expected timeline for the reopening of the Strait of Hormuz.
ANZ analysts have also lifted their short-term Brent forecast to $95 a barrel and warned that prices could move higher if the Middle East conflict escalates. They said a prolonged standoff involving calibrated military action by the US and Iran appeared to be the most likely scenario, potentially delaying the return of full Middle Eastern supply.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
