Oil Prices Plummet as Middle East Supply Disruption Fears Ease

Oil prices dropped by about 2% on Thursday to reach a one-week low due to easing supply disruption fears in the Middle East. Brent crude futures fell $2.67, or 2.5%, to $103.13 a barrel at 12:03 p.m. ET (1603 GMT), while US West Texas Intermediate futures declined by $1.61, or 1.6%, to $100.82 a barrel. These levels mark the lowest since September 10 and 11, respectively.

The decline came after reports that Saudi Arabia would restore about half of its East-West pipeline capacity within days following drone attacks last week. The pipeline supplies crude to the Red Sea export hub of Yanbu. Additionally, Saudi Arabia is offering more crude cargoes to Asian refiners through ship-to-ship transfers off Oman's Sohar port.

Traders say a prolonged closure of the East-West pipeline could cut off as much as 4% of global oil supply. Despite this, the physical market remains tight, limiting further declines in prices. Tanker traffic through the Strait of Hormuz continues to fall, while tensions between Saudi Arabia and the Houthis leave Red Sea shipping and regional energy infrastructure exposed to renewed disruption.

Singapore's DBS Bank predicts that Brent will stabilize in an $85 to $95 a barrel range by the fourth quarter if tensions between the US and Iran ease. Meanwhile, tightening diesel supplies have emerged as another source of pressure due to disruptions to energy infrastructure in the Middle East and Russia.