Oil prices declined in early trade on Thursday, continuing the downward trend from the previous session, following reports that Saudi Arabia was providing additional crude cargoes via Oman, which alleviated concerns regarding supply disruptions in the Middle East. The latest move followed Saudi Arabia’s provision of additional crude loadings to Asian refiners via ship-to-ship transfers at Oman’s Sohar port, as reported. The additional shipments are contributing to mitigating some of the supply disruptions resulting from the attacks on Saudi Arabia’s East-West pipeline, which extends to the Red Sea. Brent crude futures decreased by $1.25, representing a decline of 1.22%, settling at $104.62 per barrel. Meanwhile, U.S. West Texas Intermediate futures saw a reduction of $1.16, or 1.2%, bringing the price to $101.20 per barrel. Both benchmarks experienced a decline of approximately $3 on Wednesday. Oil had risen to approximately four-month highs earlier this week following reports from shipping industry sources indicating that crude loadings at Saudi Arabia’s Red Sea export hub of Yanbu had been halted.

According to traders, Riyadh has also cancelled certain crude cargo deliveries to European customers. The disruptions ensued subsequent to assaults on the East-West pipeline, which serves Yanbu. Yanbu emerged as Saudi Arabia’s primary oil export outlet subsequent to Iran initiating a blockade of the Strait of Hormuz, a response triggered by U.S. and Israeli military actions against the nation at the close of February. Prior to the onset of hostilities, the Strait of Hormuz was responsible for the transit of one-fifth of the global oil supply. Two pumping stations linked to the East-West pipeline sustained damage in an attack last week, with the timeline for repairs still uncertain, as per evaluations from three oil and security sources. Despite Thursday’s decline, apprehensions regarding the escalating conflict in the Middle East persist. Saudi warplanes conducted strikes in Yemen, while Houthi fighters reportedly launched drones and missiles targeting Saudi cities on Wednesday, as stated by the Iran-backed movement. This escalation follows a swift advance that has broadened Tehran’s influence in the ongoing Middle East conflict.

Crude petroleum has experienced an approximate 75% increase this year, influenced by the U.S.-Iran conflict that has curtailed oil flows from the Middle East, alongside the ongoing Russia-Ukraine war. The prospect of additional disruptions has increasingly tilted the risks for oil prices toward the upside. Daan Struyven indicated that recent attacks demonstrated the potential for shipping disruptions to proliferate and intensify. Goldman Sachs has delineated a situation where oil prices may escalate to $120 a barrel should assaults on vessels in the Middle East become more severe. If exports return to normal, the bank anticipates a decline in oil prices, potentially reverting to approximately $80 per barrel. Struyven indicated that shipping risks have surfaced as a significant factor influencing oil prices. Struyven indicated that Goldman Sachs perceives “meaningful upside to crude oil prices” and anticipates a rise in natural gas and refined product prices as well. He noted that supply shocks in petrol and fuels are more significant than those observed in the crude market.

The duration of the disruption will be critical for oil prices. JPMorgan estimates that each additional month of disruption could contribute approximately $7 to $8 per barrel to Brent prices. If the disruption persists for three months, the bank anticipates average monthly Brent prices to hover around $114 a barrel. Citi has increased its average Brent crude price forecast for the third quarter to $86 a barrel, up from $80, attributing this adjustment to a longer-than-anticipated timeline for the reopening of the Strait of Hormuz. Analysts have revised their short-term Brent forecast upward to $95 a barrel, cautioning that prices may increase further should tensions in the Middle East intensify. A prolonged standoff involving calibrated military action by the U.S. and Iran appears to be the most likely scenario, potentially delaying the return of full Middle Eastern supply.