Oil Prices Fall as Saudi Supply Route Eases Middle East Fears

TOKYO: Global oil prices moved lower on Thursday as fresh Saudi supply arrangements through Oman reduced immediate fears of severe disruption to crude shipments from the Middle East, offering some relief to energy-importing economies including Pakistan.

Brent crude futures fell by $1.24, or 1.2 percent, to $104.59 a barrel in early trading, while US West Texas Intermediate crude declined by $1.14, or 1.1 percent, to $101.29. Both benchmarks had already dropped by about $3 during the previous session, extending a retreat from recent four-month highs.

The decline followed reports that Saudi Arabia was making additional crude cargoes available to Asian refiners through ship-to-ship transfers near the Omani port of Sohar. The alternative route has helped reduce concerns that damage to Saudi energy infrastructure could significantly tighten international supply in the near term.

Saudi Arabia's Red Sea export system has faced disruption after attacks damaged pumping stations connected to the kingdom's East-West pipeline. Crude loadings from Yanbu had been suspended, while some deliveries to European customers were cancelled. The pipeline became increasingly important after conflict disrupted normal traffic through the Strait of Hormuz, historically one of the world's most important energy corridors.

Despite the fall in prices, regional risks remain elevated. Fighting involving Saudi forces and Yemen's Houthis has continued, with reports of air strikes, drones and missile attacks adding uncertainty to energy markets. Two pumping stations serving the East-West pipeline were damaged during an attack, and there was no firm timetable for completing repairs.

Developments in the Gulf and Red Sea remain particularly important for Pakistan because fluctuations in international crude prices and shipping conditions can feed into the country's fuel import costs, foreign-exchange requirements and domestic energy prices. Any sustained easing in global oil prices could reduce some import pressure, although continued conflict and transport disruptions mean the outlook remains volatile.

Market participants are also watching diplomatic developments ahead of a planned US-China summit, with expectations that progress toward reducing wider Middle East tensions could limit further increases in oil prices. At the same time, traders remain cautious because renewed attacks on shipping or energy infrastructure could quickly reverse the current decline.

Supply data from the United States added another factor to Thursday's market movement. US crude inventories fell by about 640,000 barrels last week, a smaller reduction than analysts had expected. The combination of additional Saudi export options, softer inventory data and continuing geopolitical uncertainty is expected to keep oil markets highly sensitive to new developments in the coming days.