Oil prices declined on Wednesday, businesstimes.com.sg, following reports that Saudi Arabia was offering additional crude cargoes to Asian refiners through ship-to-ship transfers off Oman’s Sohar port. Brent crude futures fell 2.7 per cent to settle at US$105.83 a barrel, while US West Texas Intermediate futures dropped 3.2 per cent to close at US$102.43 a barrel.
Oil Prices Fall as Saudi Arabia Reroutes Crude After Pipeline Attacks
The alternative loading arrangements were established after drone and missile attacks damaged a major Saudi East-West pipeline connecting production facilities to the Red Sea port of Yanbu. Prior to the strikes, Yanbu had served as Saudi Arabia’s primary oil export outlet, allowing the kingdom to bypass the Strait of Hormuz after Iran began blockading the waterway following US and Israeli attacks at the end of February. Following the pipeline shutdown, crude loadings at Yanbu were suspended and some cargo deliveries to European customers were cancelled.
Sohar Ship-to-Ship Transfers Ease Supply Fears
State oil company Saudi Aramco offered its flagship Arab Light grade alongside Arab Medium and Arab Heavy to long-term Asian buyers for loading off Sohar, which is located outside the Strait of Hormuz. UBS analyst Giovanni Staunovo noted that news of Saudi exports originating from the Gulf suggested that concerns regarding the potential scale of the supply disruption were easing.
According to satellite tracking by consultancy Energy Aspects, Saudi Arabia doubled its daily crude loadings over the preceding week at its Ras Tanura and Juaymah terminals inside the Gulf to around two very large crude carriers, which is equivalent to four million barrels. Separate ship-tracking data from Kpler indicated that four such tankers, capable of carrying a combined eight million barrels, were loading at Ras Tanura.
Strait of Hormuz and Global Inventory Pressures
Visible vessel passage through the Strait of Hormuz remained low, with preliminary shipping data showing four visible vessel transits on Tuesday, compared with seven the previous day and well below the 10-day average of 18. Before the conflict began in late February, approximately one-fifth of global oil and liquefied natural gas supplies passed through the strait. Macquarie analysts estimated that actual flows of crude oil, condensate, and refined products may have exceeded 7.5 million barrels per day since fighting resumed on August 30.
Downward pressure on oil prices was further reinforced by inventory data. The US Energy Information Administration reported a smaller-than-expected draw of approximately 640,000 barrels from US crude inventories, falling short of the 1.62 million barrel draw anticipated by a Reuters poll of energy analysts. Meanwhile, US gasoline and distillate inventories rose over the same weekly period.
Regional Escalation and Diesel Market Concerns
Tensions in the Middle East remained elevated as Saudi warplanes targeted Yemen and Houthi fighters launched drones and missiles at Saudi cities. The Houthis claimed responsibility for fresh strikes on Yanbu. Citi analysts indicated that near-term escalation in the region is expected to continue supporting crude and refined fuel prices before the Strait of Hormuz eventually reopens in the fourth quarter of 2026, supported by regional diplomatic efforts.
Diesel remained the primary concern in global oil markets amid regional disruptions. European diesel and gasoil futures settled at record highs, driven by losses of Middle East supply and refinery disruptions in Russia.
