Brent crude dropped $1.24 to $104.59 a barrel in early Asian trading, while US West Texas Intermediate fell $1.14, or 1.1 per cent, to $101.29. Prices later pared some losses, with Brent at $105.64 and WTI at $102.10 by 0347 GMT. Both benchmarks had lost about $3 a barrel on Wednesday.
The decline followed indications that Saudi Arabia was arranging extra loadings through ship-to-ship transfers off the Omani port of Sohar. The alternative route gives Saudi Aramco another way to move barrels towards Asian customers while its main cross-country pipeline remains out of service.
The 1,200-kilometre East-West pipeline, also known as Petroline, carries crude from eastern production centres to the Red Sea port of Yanbu, allowing exports to bypass the Strait of Hormuz. Saudi authorities shut the line as a precaution after drone attacks damaged two pumping stations last week. Officials said the drones came from Iraq, while responsibility for the attack has not been conclusively established.
Yanbu loadings were suspended after the damage, increasing pressure on a supply network already constrained by severely reduced tanker traffic through Hormuz. Before the current Middle East conflict, the strait carried roughly one-fifth of the world’s oil supply and was the principal outlet for Gulf producers.
Market participants said the additional Saudi cargoes through Oman reduced the immediate risk of lost barrels but did not eliminate it. The alternative flows are expected to cover only part of the volumes normally handled through Yanbu, leaving the market exposed if repairs take longer or security conditions deteriorate further.
Saudi Arabia’s East-West pipeline has been moving several million barrels a day, with industry estimates placing flows broadly between 2.6 million and 5 million barrels per day depending on the period measured. Its maximum capacity is higher, but actual exports have varied with production levels, storage availability and shipping constraints.
The supply picture has also been complicated by instability around the Bab el-Mandeb Strait at the southern entrance to the Red Sea. Houthi forces have expanded their presence around strategic coastal areas and islands, adding another layer of risk to shipping routes used for crude moving from Yanbu towards Asian markets.
Saudi Arabia has simultaneously increased use of Gulf export terminals where possible. Analysts say those facilities provide some flexibility, but their effectiveness depends on how much commercial shipping can safely move through Hormuz and on the availability of tankers willing to operate in the area.
US inventory data provided a separate signal for traders. Commercial crude stocks fell by about 600,000 barrels in the week ended September 11 to 423.4 million barrels, according to the Energy Information Administration. The decline was smaller than market expectations for a draw of about 1.6 million barrels.
US crude production slipped by about 3,000 barrels per day to 13.94 million barrels per day, while exports rose sharply to 4.83 million barrels per day. Gasoline inventories increased by about 800,000 barrels to 207.7 million barrels.
Shipping data underlined the continuing fragility of the Gulf route. Only three commercial vessels were recorded transiting the Strait of Hormuz on Wednesday, down from 12 a day earlier and well below a 10-day average of 17, although some ships may have travelled with tracking systems switched off. Traffic through Bab el-Mandeb also eased, with 21 crossings compared with 24 the previous day. US strategic petroleum reserves, which are excluded from commercial inventory figures, declined by about 400,000 barrels to 285 million barrels, limiting another cushion available to the market if regional supply losses become more prolonged or widespread.
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