Oil Surges after US-Iran Talks Collapse

Crude oil prices tumbled below $100 a barrel on Friday, erasing gains after a volatile session and falling for a third consecutive session. Markets expect the closure of Saudi Arabia’s key pipeline to have a smaller impact on supplies than initially feared. Satellite imagery suggests Saudi Arabia moved 2.8 million bpd through the Strait of Hormuz over the past six days, compared with just 700,000 bpd in August. Saudi Arabia has reportedly sold as many as 60 million barrels of crude from the Persian Gulf port of Ras Tanura for September and October loadings outside the strait through ship-to-ship transfers. Reports that Aramco expects to restore half of the pipeline’s daily flows also eased supply concerns. Still, only four commodity vessels were detected moving through Hormuz on Thursday. Volumes from Hormuz are being picked up mostly by refiners in China and South Korea. China exported 6.01 million tons of refined fuels in August, up 12.7% yearly. Oil prices fell 0.5% on the week.

Crude oil prices pared earlier losses on Friday, trading around $102.2 a barrel as markets weighed disruptions to Saudi supply. Satellite imagery and industry sources indicated that three pumping stations serving Saudi Arabia’s vital East-West Pipeline were damaged in last week’s attack, one more than previously assessed, while the repair timeline remains uncertain. Saudi Arabia and Iran-backed Houthi forces in Yemen exchanged fresh strikes across their border on Thursday, while civilians fled by boat across the Red Sea as fighting spread. Saudi Aramco has also informed at least two European refining customers that they will receive no crude next month following the attack on the key pipeline to the Red Sea. Meanwhile, China’s refined oil product exports rose 12.7% year on year in August, with jet fuel exports reaching a record high. Further easing of export controls in September could allow Chinese refiners to benefit from stronger overseas margins. Oil is up for the third week.

Crude oil eased toward the $100 per barrel threshold on Friday from the four-month high of $106 on Tuesday as market speculated on the likelihood of higher supply from the Middle East. US President Trump noted the possibility that the US could re-escalate attacks against Iran after recent attempts of dialogue between Tehran, Washington, and GCC states have not restored maritime oil exports. Meanwhile, Saudi Arabia stated its East-West pipeline could come online in the next days after strikes from Iran-affiliated armies forced its suspension. The halt prevented 7 million barrels per day being allocated to the Red Sea, an alternative to halted tankers in the Persian Gulf due to blockades. The prolonged halt of tanker flows from the region forced major OPEC members to cut oil production, with Saudi output recently dropping to its lowest since 1990. Dwindling stockpiles of oil in China drove the major importer to raise orders in August, while the US SPR stands at a near record low.