Saudi crude reroute via Oman brings oil down from near four-month highs

The drop reflects a genuine reduction in the immediate supply shock rather than a settlement of the broader dispute, given that Saudi Arabia's alternative route through Oman compensates for the lost loading capacity at Yanbu but does not alter the fact that the East West pipeline remains broken without a known repair schedule. That difference is key to how lasting this decline may be. With Houthi attacks on Saudi urban areas persisting and the group claiming a swift expansion that deepens Iran's influence in the region, the risk premium in oil could quickly return if the Oman route fails to compensate for additional disruptions, or if discussions about de-escalation ahead of next week's US-China summit produce no concrete results.

A Saudi fix involving Oman is easing the oil supply panic, but the damaged pipeline remains out of service and the conflict driving the crisis continues to expand.

• Brent crude fell 1.2% to $104.59 a barrel and West Texas Intermediate dropped 1.1% to $101.29 by 0049 GMT on Thursday, extending Wednesday's decline of roughly $3
• Saudi Arabia is providing additional crude shipments to Asian refiners via ship-to-ship transfers off the port of Sohar in Oman, calming worries about a more severe supply shortfall
• Oil had reached around four-month highs earlier this week following reports that Yanbu loadings were halted and Riyadh canceled some European cargo deliveries
• The halt came after attacks on the East West pipeline that supplies Yanbu, which had become Saudi Arabia's primary export route after Iran's blockade of the Strait of Hormuz
• Two pumping stations on the East West pipeline remain damaged from an attack last week, with no clear timeline for repairs
• Houthi forces continued drone and missile strikes on Saudi cities on Wednesday even as prices fell, and Saudi warplanes retaliated with strikes in Yemen

Oil prices declined further in early trading on Thursday, building on the previous session's losses, after reports that Saudi Arabia is offering additional crude shipments via Oman calmed worries about a deeper supply disruption from the Middle East conflict, according to Reuters.

Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, said fears about supply tightness eased somewhat after news that Saudi Arabia would transport cargo via Oman. He also noted that expectations of progress toward reducing Middle East tensions before next week's US-China summit are limiting price gains. Saudi Arabia is offering additional crude loadings to Asian refiners through ship-to-ship transfers off Oman's Sohar port, according to people familiar with the matter, a workaround meant to mitigate some of the impact on global supply from attacks on the kingdom's East West pipeline to the Red Sea.

Oil had risen to around four-month highs earlier this week after shipping industry sources said crude loadings at Yanbu, Saudi Arabia's Red Sea export hub, had been suspended, with Riyadh cancelling some cargo deliveries to European customers. That suspension followed attacks on the East West pipeline that supplies the port. Yanbu became Saudi Arabia's main oil export outlet after Iran began blockading the Strait of Hormuz following the US and Israeli attack on the country at the end of February, a chokepoint that before the war carried about one-fifth of the world's oil supply. Two pumping stations serving the East West pipeline were damaged in an attack last week, and the repair timeline remains unclear, according to assessments from three oil and security sources.

Despite Thursday's pullback, the underlying war shows no sign of cooling. Saudi warplanes struck targets in Yemen and Houthi fighters launched drones and missiles at Saudi cities on Wednesday, the Iran-backed movement said, following what it described as a rapid advance that has extended Tehran's reach across the Middle East war. That combination, a tactical supply fix easing near-term price pressure against a conflict that continues to widen, leaves the durability of Thursday's decline very much in question.