Saudi Oil Export Fears Ease as Ship-to-Ship Transfers Restart

Crude oil prices are poised to post their first weekly loss in three weeks as fears about Saudi Arabia's ability to export oil have eased. The concerns arose after Yemeni Houthis attacked the East-West pipeline, which carried approximately 4-5 million barrels per day (bpd) of Saudi oil to global markets via the Red Sea.

The attack led to the cancellation of several crude cargo shipments to Europe earlier this week, deepening concerns about a potential supply shortage. However, reports emerged that Aramco had switched to ship-to-ship transfers in the Gulf of Oman, outside the Strait of Hormuz, to move oil out of the country.

Analysts believe that physical flows can normalize and that some of the geopolitical premium may unwind if there is a sustained improvement in Hormuz traffic. However, it remains unclear what the timeline for normalizing these flows will be.