Oil Prices Drop as Middle East Exports Rise and G7 Releases Reserves
Oil prices dropped by around $2 on Monday, driven by higher crude exports from the Middle East and a promise from the Group of Seven (G7) nations to release additional supplies. Brent crude futures settled at $100.32 a barrel, down $1.93, while US West Texas Intermediate crude fell to $89.43, a loss of $1.68. Despite ongoing attacks on vessels in the Strait of Hormuz, Middle Eastern crude exports surged above pre-war levels in four of the last seven days of September, according to shipping data.
The G7 countries agreed on Friday to release 100 million barrels of diesel and crude from emergency reserves, though analysts remain skeptical about the actual volume available. The market questioned how much of this oil would come from the remaining volumes of the International Energy Agency’s (IEA) 400 million-barrel emergency release announced earlier this year. IEA Executive Director Fatih Birol noted that members had already released about two-thirds of that commitment.
Amid ongoing geopolitical tensions, British oil major BP announced plans to adjust its refineries to produce more diesel. Analysts warned that the supply backdrop remains tight, with Saudi Aramco CEO Amin Nasser expecting crude oil and refined fuel supplies to stay stretched for the next two years. The US Strategic Petroleum Reserve fell to 283 million barrels last week, the lowest level since 1982.
The conflict between Saudi Arabia and Iran-backed Houthi forces in Yemen continued to escalate, raising concerns about production disruptions. Yemeni government forces attacked Houthi positions near the strategic Bab el-Mandeb Strait. Meanwhile, OPEC+ postponed a review of 2027 oil output quotas due to uncertainties caused by the Iran war. Saudi Aramco also cut November crude oil prices for Asia to six-year lows.