BY COMFORT OGBONNA
Oil prices fell more than 2% on Tuesday as rising crude exports from the Middle East and plans by the Group of Seven nations to release emergency fuel reserves eased concerns about a potential supply shortage. However, continuing security threats in the region limited the decline and kept traders cautious about the outlook for global energy markets.
Brent crude futures were down $1.70, or 1.7%, at $98.62 a barrel at 10:13 GMT, while U.S. West Texas Intermediate crude futures fell $1.83, or 2.1%, to $87.60.
The decline followed signs that oil shipments from major Gulf producers were recovering despite the ongoing conflict in the region. Gulf oil flows excluding Iran rose to more than 81% of their pre-war levels in September, according to data released Tuesday.
The increase in exports has helped ease some of the market’s concerns that fighting could significantly reduce the amount of crude reaching international markets.
Saudi Arabia has also continued to use alternative transportation routes to move crude as it seeks to protect exports from disruptions. The country’s energy minister said oil flowing through the East-West Pipeline, which was damaged in a drone attack last month, had reached 5.8 million barrels.
Developments around the Bab el-Mandeb Strait also contributed to the improved supply outlook. Saudi-backed Yemeni government forces advanced toward the coast around the strategic waterway and the city of Mocha on Monday in an effort to retake territory from Houthi rebels.
The Bab el-Mandeb is an important shipping route connecting the Red Sea with the Gulf of Aden and is critical to global trade and energy transportation. Any prolonged disruption in the area could increase shipping costs and create delays for oil and other commodities.
The recent military developments have nevertheless reduced some immediate fears of a major disruption to crude shipments, helping push oil prices lower.
For now, traders appear more focused on the amount of oil successfully reaching international markets than on the broader geopolitical risks surrounding the region.
Gulf oil producers have also been adjusting production and pricing strategies in response to changing market conditions. Kuwait has said it is producing at about 75% of its pre-war level, while Saudi Arabia recently lowered the official selling price for its Arab Light crude destined for Asia for November deliveries.
The price reduction was viewed by market analysts as another indication that supply conditions may be improving.
Additional relief came after G7 countries agreed Friday to release 100 million barrels of crude and diesel from emergency reserves. The countries also pledged not to impose restrictions on energy exports, following pressure from U.S. President Donald Trump.
The coordinated reserve release is intended to increase the availability of fuel and crude oil in global markets at a time when traders remain concerned about the impact of the Middle East conflict on energy supplies.
The additional barrels could help offset some of the supply disruptions caused by the conflict and reduce the urgency among buyers competing for available crude.
Despite those developments, the market remains highly sensitive to security conditions across the region. The conflict involving Saudi Arabia and Houthi forces continues to pose a threat to energy infrastructure and transportation routes.
Two Saudi airports in Jazan and Najran were targeted in separate attacks Monday evening, injuring three people and causing limited damage, according to Saudi authorities. The attacks highlighted the continuing risks facing the kingdom as hostilities with the Houthis escalate.
The attacks have kept traders wary that further strikes could target oil facilities, pipelines, ports or other infrastructure used to transport energy.
Any significant damage to Saudi oil infrastructure could quickly change the current market outlook because the kingdom is one of the world’s largest oil producers and plays a central role in global supply.
For now, however, the increase in Gulf exports and the planned release of emergency reserves have provided enough reassurance to push prices lower. Traders are expected to continue monitoring shipping activity, military developments and production levels across the Middle East for signs of whether the improvement in supply flows can be sustained.
The market remains caught between two competing forces: increasing crude availability that is putting downward pressure on prices and geopolitical risks that could quickly disrupt supplies and send prices higher again.
As long as exports continue to recover and emergency reserves are released as planned, oil prices could remain under pressure. But any significant escalation in attacks or disruption to key shipping routes could quickly reverse the decline.
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