Oil prices declined by more than one percent on Friday, marking a continuation of losses for the third consecutive session, although both benchmarks continued to trade above the $100 per barrel threshold. Expectations that alternative routes may facilitate the flow of Middle Eastern barrels into global markets have overshadowed apprehensions regarding renewed hostilities between Saudi Arabia and Yemen’s Houthis. Markets appeared to disregard the recent supply threats, despite the ongoing exchanges of strikes between Saudi Arabia and Yemen’s Iran-backed Houthis on Thursday, which have expanded the regional implications of the conflict. Brent crude futures decreased by $1.01, representing a decline of 1.04%, settling at $103.70 per barrel. Meanwhile, US West Texas Intermediate futures saw a reduction of $0.94, or 0.92%, bringing the price to $101 per barrel. Both benchmarks concluded approximately 1% lower on Thursday.

Oil prices reached approximately four-month highs earlier this week following the suspension of crude loadings at Saudi Arabia’s Red Sea export hub in Yanbu. Riyadh has also suspended certain deliveries to Europe following an attack last week that resulted in damage to its East-West pipeline. According to a report, satellite imagery and three industry sources indicated that three pumping stations along the pipeline had sustained damage, exceeding previous assessments by one. Traders have indicated that an extended closure of the pipeline to Yanbu might result in a reduction of up to 4% in the global oil supply. Source reported that Saudi Arabia is seeking to restore approximately fifty percent of the East-West pipeline’s capacity within days, following the suspension of this crucial link to the Red Sea due to drone attacks last week. Saudi Arabia was also providing extra crude cargoes to Asian refiners via ship-to-ship transfers off Oman’s Sohar port, potentially mitigating some of the disruption resulting from the attacks on the pipeline.

US Energy Secretary Chris Wright has indicated that crude is expected to begin flowing through the pipeline in the coming days. The uncertainty in the market was highlighted by JPMorgan, which stated on Thursday that it lacked a definitive baseline view for oil markets for the first time since the onset of the US-Israeli conflict with Iran. The potential for additional supply disruptions has progressively shifted the risks for oil prices toward the upside. Daan Struyven indicated that recent attacks have demonstrated the potential for shipping disruptions to proliferate and intensify. Goldman Sachs has delineated a scenario wherein oil prices might ascend to $120 per barrel should assaults on vessels in the Middle East escalate. If exports return to normal, the bank anticipates that oil prices will decline toward $80 a barrel. Struyven stated that shipping risks have emerged as a significant factor influencing oil prices.

Struyven indicated that Goldman Sachs anticipates “meaningful upside to crude oil prices” and also predicts an increase in natural gas and refined product prices. He noted that supply shocks in petrol and fuels are more significant than those observed in the crude market. Citi has adjusted its average Brent crude price forecast for the third quarter to $86 a barrel, up from $80, attributing this revision to a longer-than-anticipated timeline for the reopening of the Strait of Hormuz. Analysts have raised their short-term Brent forecast to $95 a barrel and cautioned that prices may increase further should the conflict in the Middle East intensify. It was indicated that a prolonged standoff characterised by measured military engagement between the US and Iran seems to be the most probable outcome, which could consequently postpone the restoration of complete Middle Eastern supply.