Anna Hartz
Brent crude prices fell sharply as oil supplies from the Gulf recovered faster than expected.
December Brent futures dropped about 3% and briefly fell below $98 a barrel. The move came as more oil began flowing through the Strait of Hormuz and Saudi Arabia restored an important alternative export route.
5.8 million barrels flowed through Tuesday
Oil flows from Gulf countries excluding Iran rose to more than 81% of pre-war levels in September, according to Reuters. Saudi Arabia led the recovery by sending crude through the Strait of Hormuz while also using its pipeline network.
The strait remains dangerous because of attacks on shipping and energy infrastructure. But tankers are still getting through, reports el Economista. Some Gulf producers have also used so-called “dark transits,” with ships switching off their tracking systems to make them harder to detect.
Iran has seen a very different situation. Reuters data showed that Iranian oil exports fell to zero in September as US sanctions severely restricted its ability to sell crude.
Saudi Arabia has also been able to rely more heavily on its East-West pipeline. The system carries oil across the country to Yanbu on the Red Sea, allowing Saudi crude to reach international markets without passing through the Strait of Hormuz.
Saudi Energy Minister Prince Abdulaziz bin Salman said flows through the pipeline had reached 5.8 million barrels early on Tuesday. Reuters reported that the pipeline had resumed operations after being shut following drone attacks earlier in September.
Still vulnerable to attacks
Since the conflict disrupted oil shipments through the strait, Saudi Arabia has been using the pipeline to move about four million barrels of crude per day toward Yanbu. That is roughly 4% of global oil supply.
The recovery does not remove the risk of another disruption. Shipping remains vulnerable to attacks and Saudi energy infrastructure could face further strikes. But the immediate shortage feared by oil traders has become less severe as more barrels reach the market.
Saudi Aramco CEO Amin Nasser has warned that global oil inventories remain dangerously low. He estimates that around one billion barrels have been removed from reserves and could take about two years to replace.
At the same time, Aramco has cut its November selling price for Asian customers to its lowest level since June 2020. Brent futures are also pointing to lower prices over the longer term, with December 2027 contracts trading well below current levels.
Sources: Reuters, el Economista
