Saudi Arabia Attempts to Restore Bypass Pipeline Around Hormuz... International Oil Prices Ease
"Crude Exports via Oman Expected to Rise"
Continued Houthi Attacks and Extended Russian Diesel Ban Are Negative Factors
Saudi Arabia has begun repairing the oil pipeline that was shut down following a drone attack by Yemen's Houthi rebels, and it is reportedly planning to increase crude oil shipments via Oman. As a result, the steep upward trend in global oil prices, which had been surging in recent days, has eased somewhat. However, concerns remain that it will be difficult for oil prices to fall below the 100 dollars per barrel mark in the near future, as Houthi attacks on Saudi territory are ongoing and Russia has extended its diesel export ban.
According to Bloomberg News on the 16th (local time), citing anonymous sources, “Saudi Aramco, the state-owned oil company, is working to restore about half of the transportation capacity of the East-West Pipeline, which was damaged by Houthi airstrikes, using a bypass route. The goal is to fully restore capacity within six weeks.”
Separately from the pipeline repair, Saudi Arabia will also increase crude oil shipments to Asia via Oman. Bloomberg News reported, “Aramco plans to step up shipments of pre-ordered crude to Asia, including China, using Omani ports. The plan is to deliver these pre-ordered volumes to Asian refiners, including China, through October.”
The U.S. government also emphasized that Middle Eastern oil supply will improve soon. U.S. Secretary of Energy Chris Wright stated in a CNBC interview, “The suspension of Saudi pipeline operations is a short, temporary interruption lasting only a few days. Saudi Arabia, with U.S. military support, is taking swift action to supply more crude through the Strait of Hormuz.”
Amid concerns over oil supply disruptions, the recent sharp surge in global oil prices has temporarily stalled. On this day, Brent crude, a benchmark for international oil prices, fell 2.69% to close at 105.83 dollars per barrel, while West Texas Intermediate (WTI) dropped 3.21% to 102.43 dollars per barrel. The previous day, Brent crude had reached 108.75 dollars per barrel, threatening to break above 110 dollars.
The U.S. government is also reportedly in negotiations with Houthi rebels who are controlling the Red Sea shipping lanes. According to Reuters, American and Houthi delegations met at the U.S. Embassy in Muscat, Oman over the weekend, with Oman mediating. Reuters reported that the Houthis told the U.S. side they have no intention of attacking U.S. vessels and reaffirmed their commitment to the ceasefire agreement reached with the U.S. last year.
However, as fighting between Saudi Arabia and the Houthis intensifies, overall supply uncertainty has not been completely resolved. According to CNN, the Houthi rebels announced on this day that they shot down a Saudi F-15 fighter jet. The Houthis are reportedly attempting drone attacks across Saudi Arabia, targeting cities in the southern region as well as the holy city of Mecca.
In response, Saudi Arabia reportedly launched a ballistic missile at the Houthi rebels for the first time in actual combat. According to The Wall Street Journal (WSJ), Saudi missile debris was found in areas controlled by Yemen's Houthi rebels and it is believed to be a Chinese-made Dongfeng (DF)-15 ballistic missile. The Saudi side denied this, stating they do not possess Chinese-made ballistic missiles.
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The extension of Russia’s diesel export ban by the world’s second-largest oil products producer is another negative factor. According to TASS, the Russian government extended the ban from the end of this month to the end of October. Russia began banning the export of refined oil products, including diesel, in July, after its refineries were damaged in the ongoing conflict with Ukraine.
There are growing concerns that the upward trend in crude oil and refined oil prices will persist until the geopolitical crisis in the Middle East subsides. In a report released today, Citibank pointed out, “The increase in global oil prices is likely to continue in the short term until the Strait of Hormuz is reopened with the support of international diplomatic efforts in the fourth quarter of this year.” According to CNN, the Houthi rebels announced on this day that they shot down a Saudi F-15 fighter jet. The Houthis are reportedly continuing drone attacks across Saudi Arabia, targeting southern cities as well as the holy city of Mecca.
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