Saudi Supply Recovery Weighs on Oil Prices, WTI Crude Falls Below $100

Oil prices took a sharp hit on September 18 as WTI crude plummeted nearly 5% below $100. This decline was largely driven by easing Middle East supply concerns, particularly in Saudi Arabia.

Saudi Arabia had been struggling to transport oil due to an attack on its East-West pipeline, but the country has since implemented ship-to-ship transfers near the Port of Sohar in Oman to boost supplies to Asian refineries. Market reports suggest that Saudi plans to restore about half of the damaged pipeline's capacity within days.

This move has alleviated previous market fears of major disruptions to Saudi exports and erased a portion of the geopolitical risk premium from oil prices. However, supply risks have not been fully dispelled, with vessel traffic through the Strait of Hormuz still below pre-conflict levels.

U.S. inventory data also put pressure on oil prices, as commercial crude oil inventories fell by only about 640,000 barrels last week, a smaller draw than expected. The Federal Reserve's decision to raise interest rates this week has further heightened market concerns over slowing energy demand and fueled profit-taking in crude oil.