Oil Prices Pull Back Amid Saudi Disruption Easing, But Supply Risks Remain Elevated
Oil prices pulled back from their recent highs after Saudi Arabia's pipeline disruption was found to be less severe than expected. However, supply-side risks remain elevated, and not only in the Middle East, according to ING Bank analysts.
The Brent Crude price fell to $100 per barrel from a high of $108 early last week, after Saudi exports through the Strait of Hormuz were higher than anticipated. The hope for a diplomatic breakthrough between the US and Iran also weighed on prices at the end of last week and early this week.
However, oil prices reversed course on Tuesday morning ahead of a UN General Assembly session that may yield some progress on peace talks between the two countries. U.S. Treasury Secretary Scott Bessent threatened Iranian airlines with a 'shut-down' from Wednesday, by means of airports refusing to refuel them and sell tickets.
'How do we do that? That if they land, you cannot provide them with fuel. You cannot provide them with landing services, you cannot sell them tickets, or you will be knocked out of the dollar system,' Bessent told CNBC in the latest US flex against Iran.
ING's commodities strategists Warren Patterson and Ewa Manthey noted that supply-side risks remain elevated, citing fresh supply concerns coming from Libya. An armed group shut down a valve at the pipeline linking the biggest oilfield, Sharara, with the Zawiya export terminal on Monday. As a result, output at the field was slashed to around 127,000 barrels per day (bpd), from roughly 340,000 bpd prior to the incident.