Oil Prices Extend Decline as Saudi Arabia Eases Supply Fears, Brent Stays Above $100

New Delhi: Global oil prices moved lower on Thursday as fresh efforts by Saudi Arabia to maintain crude shipments through an alternative route helped calm some concerns about a major supply shortage. However, the market remained highly sensitive to the continuing conflict across the Middle East. Brent crude futures fell $1.88, or 1.8%, to $103.95 a barrel by 0632 GMT on September 17. U.S. West Texas Intermediate (WTI) crude also declined, dropping $1.77, or 1.7%, to $100.66 a barrel. Both benchmarks had already lost around $3 during the previous trading session. Despite the latest decline, crude prices remain above the psychologically important $100 per barrel level, reflecting continued uncertainty over supplies from the Middle East.

Saudi Arabia finds an alternative route for crude exports

One of the main factors behind Thursday's decline was news that Saudi Arabia is offering additional crude cargoes to Asian buyers through Oman. People familiar with the situation said Saudi oil is being moved through ship-to-ship transfers near Oman's Sohar port. The arrangement could help Saudi Arabia continue supplying international customers while some of its conventional export infrastructure remains affected by recent attacks. The alternative route has reduced immediate fears that the disruption could remove a much larger volume of Saudi crude from the international market. Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, said concerns about tight supply had eased somewhat following the reports of Saudi shipments through Oman. However, the development does not completely eliminate the supply risk.

Damage to Saudi pipeline remains a concern

Saudi Arabia's East-West pipeline has become a major focus for energy traders after recent attacks damaged infrastructure connected to the country's Red Sea oil exports. The pipeline transports crude toward Yanbu, an important export hub on Saudi Arabia's Red Sea coast. Reports earlier this week said crude loadings at Yanbu had been suspended and that some shipments to European customers had been cancelled. Those developments had pushed oil prices sharply higher and brought Brent to around four-month highs. The latest shipping arrangements through Oman are therefore being closely watched by traders because they could provide Saudi Arabia with another way to move barrels to international buyers.

Hormuz remains a major risk for oil markets

The Strait of Hormuz continues to be one of the biggest concerns for the global energy market. The strategic waterway is crucial for oil and gas shipments from the Gulf. Reuters reported that only three commercial vessels crossed the Strait of Hormuz on Wednesday, compared with 12 the previous day and a 10-day average of around 17. The figures may not include vessels operating with their tracking systems switched off. Lower shipping activity highlights the pressure that the ongoing conflict is putting on regional maritime trade. The Bab el-Mandeb Strait, another important shipping route connecting the Red Sea with the Gulf of Aden, has also seen reduced vessel activity. Reuters reported 21 crossings through the waterway on Wednesday, down from 24 a day earlier.

Middle East conflict keeps traders cautious

The fall in oil prices does not mean that concerns about supply have disappeared. Saudi Arabia has been drawn deeper into the regional conflict following attacks by Houthi forces and subsequent Saudi military action in Yemen. The escalation has increased uncertainty around both oil infrastructure and shipping routes. The combination of damaged infrastructure, lower maritime traffic, and continuing military activity means traders remain alert to the possibility of another supply disruption. That uncertainty is one reason oil prices have remained above $100 despite the recent decline.

Why oil prices are important for India

The latest oil price movement today is particularly relevant for India because the country imports a large share of its crude oil requirements. A sustained rise in international crude prices can increase costs across the economy. Higher crude prices can put pressure on fuel prices, transportation expenses, manufacturing costs, and inflation. For Indian consumers, movements in Brent crude are therefore important even when the domestic fuel price does not immediately change. If global crude prices remain elevated for an extended period, the impact can gradually spread through transportation and logistics costs and potentially affect prices of other goods and services. On the other hand, a sustained reduction in crude prices could ease some of these pressures, depending on currency movements, domestic taxation and other factors.

Market outlook remains highly dependent on the conflict

Analysts remain divided about how far oil prices could move because the direction of the market depends heavily on developments in the Middle East.DBS Bank's base-case scenario assumes that the conflict involving Iran will ease during the fourth quarter, which could bring Brent into the $85-$95 range. However, the bank also outlined a more adverse scenario in which continuing incidents around Hormuz and the Red Sea could push prices toward $120 a barrel before potentially moving lower again. These scenarios underline the unusual level of uncertainty currently facing the crude market. For traders, the immediate question is whether alternative Saudi export routes can compensate for lost volumes while damaged infrastructure remains unavailable.

Investors watch Saudi exports and shipping routes

For now, the additional Saudi cargoes moving through Oman have provided some relief to the oil market. But the broader situation remains fragile. Any fresh attack on oil infrastructure, a further reduction in shipping through Hormuz or an escalation involving regional military forces could quickly revive supply concerns. Conversely, signs of diplomatic progress and improved shipping conditions could place additional downward pressure on crude prices. With Brent still above $100 and WTI also around the same level, the global oil market remains closely tied to developments in the Middle East. For India and other major oil-importing economies, the coming days will be important as traders assess whether Saudi Arabia's alternative export arrangements can successfully reduce the impact of the ongoing disruption.