Oil Prices Drop Nearly 2% as Middle East Supply Fears Ease

Oil prices dropped nearly 2% on Tuesday as concerns about supply disruptions in the Middle East eased. Brent futures fell $1.84, or 1.8%, to $98.48 a barrel, while US West Texas Intermediate (WTI) crude declined $1.42, or 1.6%, to $88.01. The declines marked Brent's lowest close since September 8 and WTI's lowest since August 31.

Analysts attributed the price drop to increased crude exports from the Middle East and the Group of Seven's agreement to release emergency diesel and crude stockpiles. John Evans of oil broker PVM noted that the assumption of more crude reaching markets dampened price momentum. Vitol's CEO reported that around 12 million barrels per day of crude and 2 million bpd of refined products had left the Middle East in the past week.

Despite the price declines, risks of further supply disruptions limited the downward movement. Saudi Arabia's airports in Jazan and Najran were targeted in attacks, escalating tensions with Yemen's Houthis. Meanwhile, Saudi Energy Minister Prince Abdulaziz bin Salman stated that oil pumped through the East-West Pipeline had reached 5.8 million barrels by Tuesday morning.

The International Energy Agency is set to meet next week to finalize details of a diesel stock release, amid confusion over the volumes Europe and the US plan to provide. The G7 agreed to release 100 million barrels of diesel and crude but did not specify the breakdown or participating countries. In the US, analysts anticipated a 1.8 million barrel increase in crude stocks for the week ended October 2, which would mark the first three-week consecutive rise since August.