Oil Prices Drop as G7 Boosts Supply Amid Middle East Tensions
Oil prices dipped by roughly $2 on Monday as Middle Eastern crude exports rebounded and the Group of Seven (G7) countries committed to increasing supplies. Brent crude futures dropped $1.93, or 1.89%, to $100.32 per barrel, while U.S. West Texas Intermediate crude fell $1.68, or 1.84%, to $89.43. Despite ongoing tensions in the Strait of Hormuz, shipping data showed exports surpassing pre-war levels for four out of seven days in late September. Andrew Lipow, president of Lipow Oil Associates, noted that while tankers remain vulnerable, the market expects more oil to reach consumers.
The G7 agreed on Friday to release 100 million barrels of diesel and crude from emergency reserves, with a pledge to avoid energy export restrictions. The group promised a rapid release of diesel within 20 days and the rest over four months. However, analyst Pavel Molchanov of Raymond James expressed skepticism, questioning how much of this oil would come from the remaining volumes of the International Energy Agency's earlier 400 million-barrel release. IEA Executive Director Fatih Birol reported that members had already released about two-thirds of that amount.
BP CEO Meg O'Neill announced that the company had adjusted its refineries to produce more diesel. Meanwhile, Tamas Varga of PVM Oil Associates warned that geopolitical risks would keep the market's risk premium elevated due to ongoing conflicts in the Middle East. Saudi Aramco CEO Amin Nasser predicted that refilling global stockpiles after emergency withdrawals could take two years. U.S. Strategic Petroleum Reserve inventories dropped to 283 million barrels, the lowest since 1982.
Fighting between Saudi Arabia and Iran-backed Houthis in Yemen intensified concerns about regional production. Yemeni government forces attacked Houthi positions near the strategic Bab el-Mandeb Strait. OPEC+ delayed reviewing 2027 oil output quotas due to war-related disruptions. The subgroup of OPEC+, including Saudi Arabia and Russia, will meet on November 1 to assess market conditions. Aramco also cut November crude oil prices for Asia to six-year lows.