Oil prices fell after dropping by about 2% on Monday, as rising exports from the Arabian Gulf and price cuts by Saudi Arabia reinforced signs of easing supply shortages in the market.
The price of Brent crude, the global benchmark, fell by as much as 2.4% to below $98 a barrel, while West Texas Intermediate crude dropped below $88. Gulf producers are shipping larger volumes of oil through the Strait of Hormuz, with more tankers willing to take the risk of navigating the tense waterway despite the ongoing dangers.
Kuwait said it is pumping oil at about 75% of its pre-Iran war levels, and Iraq is seeking to charter additional tankers to export its shipments through the Strait of Hormuz. Meanwhile, Saudi Energy Minister Prince Abdulaziz bin Salman indicated that the Kingdom is currently pumping 5.8 million barrels of crude oil through the East-West pipeline that runs across the country. These developments come as Saudi Aramco slashed the selling price of its flagship Arab Light crude to Asian buyers to its lowest level in six years.
Brent crude is still up about 65% this year after the US and Israel attacked Iran in February, disrupting supplies and fueling inflation. While oil flows from the Middle East have recovered to near pre-conflict levels, product shipments remain constrained, partly due to Ukraine's strikes on Russia, which prompted G7 countries and their partners to draw on stockpiles.
Crude oil flows through the East-West pipeline exceed 80% of its capacity.
During the Made in the Gulf Conference and Forum held in the Bahraini capital, Manama, Prince Abdulaziz explained that Saudi Arabia was able to start using the line within five to six days of the attack it suffered.
Saudi state-owned Aramco has also increased crude flows through the pipeline to nearly 6 million barrels per day, more than 80% of its capacity, according to a person familiar with the matter who spoke last week.
The heads of Saudi Aramco and Kuwait National Petroleum Company, two of the largest oil producers in the Middle East, indicated that the rest of the world would have to share the burden of the cost of a war with Iran, and the resulting necessary infrastructure spending.
The war caused extensive damage to oil pipelines, refineries, gas plants, and dozens of tankers, raising the bill for new investments to tens of billions of dollars already.
Aramco CEO Amin Nasser and Kuwait National Petroleum Company CEO Sheikh Nawaf Al-Sabah told the Energy Intelligence Forum on Monday that they are seeking to increase export pipeline capacity and overseas storage capacity. Al-Sabah noted that if European countries want to obtain fuels produced in Kuwait, such as diesel and jet fuel, they will need to invest in the necessary storage infrastructure.
Supply risks remain.
However, risks remain. In Yemen, government forces have seized the Red Sea port city of Mocha from the Iranian-backed Houthis, as they advance towards the Bab al-Mandab Strait, a key route for Saudi exports.
At the same time, the official spokesman for the coalition forces said that the naval forces carried out a military operation in Hodeidah Governorate, which included the destruction of military targets that he said belonged to the Houthi group.
He added in a post on the X platform that the operation thwarted a plot for imminent attacks targeting waterways in the southern Red Sea, and included the destruction of weapons depots, explosive-laden boat storage facilities, and sea mines. He explained that the operation falls within the coalition's objectives to protect maritime security in the Bab al-Mandab Strait.
In a separate context, the non-governmental organization United Against Nuclear Iran revealed that the US embargo on Iran is keeping dozens of oil-laden tankers stranded along the country's coast, and other ships are waiting outside the Arabian Gulf off the coast of Sri Lanka. It added that at least 50 tankers loaded with Iranian oil are waiting in anchorages across the Indian and Pacific Ocean region.
The U.S. Energy Information Administration is scheduled to release its Short-Term Energy Outlook report later on Tuesday, including forecasts for fuel during the Northern Hemisphere winter.
This insight will provide indicators regarding the diesel and heating oil market at a time when the market is experiencing severe pressures and record prices.
Regarding fuel, President Donald Trump eased restrictions on tax-exempt dyed diesel in an effort to lower costs. The long-awaited move, which comes ahead of next month's midterm elections, allows for wider use of the product.
Latest oil price movements
Brent crude futures for December settlement fell 1.9% to $98.44 a barrel at 10:48 a.m. in London, while West Texas Intermediate crude futures for November delivery dropped 2.2% to $87.47 a barrel.
