Oil Prices Drop as G7 Releases Reserves and Middle East Exports Rise

Oil prices declined on Monday following increased crude exports from the Middle East and the Group of Seven's (G7) plan to release additional supplies. Brent crude futures dropped by 43 cents, or 0.4%, to $101.82 a barrel, while US West Texas Intermediate (WTI) crude fell by $1.50, or 1.7%, to $89.61. The downward pressure was partially offset by ongoing concerns over disruptions linked to the US-Israeli conflict with Iran.

Analysts noted that the G7's decision to release 100 million barrels of diesel and crude from emergency reserves would only provide short-term relief. Saxo Bank analyst Ole Hansen highlighted that the release would do little to address structural constraints facing refined products. Meanwhile, ICE gasoil futures rose by about 2% to $1,377.25 a metric ton, and BP adjusted its refineries to produce more diesel, as revealed by CEO Meg O’Neill at the Energy Intelligence conference in London.

Despite the G7's efforts, supply concerns persisted. Middle Eastern crude exports had already risen above prewar levels in four of the seven days leading up to the final week of September, according to shipping data. PVM Oil Associate analyst Tamas Varga warned that attacks on energy infrastructure and vessels would continue, maintaining elevated geopolitical risk premiums. Saudi CEO Amin Nasser anticipated that crude oil and refined fuel supplies would remain stretched, with global stockpiles taking up to two years to refill after emergency withdrawals.

Tensions in the region escalated further as the Houthis claimed to have launched ballistic missiles and drones at Saudi Aramco sites in Riyadh and Khurais. Additionally, OPEC+ postponed a review of 2027 oil output quotas due to disruptions caused by the Iran war. Meanwhile, Aramco unexpectedly cut November crude oil prices for Asia to six-year lows, potentially exacerbating the lack of refined products.