Oil Rises, Saudi Supply Risks Resist Ceasefire Pressure
Oil prices rose for a second day after Saudi Arabia said its production capacity was reduced due to attacks on energy infrastructure. However, the weekly price movement still pointed to the biggest decline since June, as risk premiums eased after the United States and Iran announced a ceasefire on Tuesday.
West Texas Intermediate (WTI) rebounded and traded above US$98 per barrel after surging 3.7% on Thursday in volatile trading. However, WTI is still down more than 10% for the week. Brent, on the other hand, hovered around US$96 per barrel.
Saudi Arabia's official news agency said the kingdom's oil production capacity was down by about 600,000 barrels per day due to the attacks on energy infrastructure. This figure is equivalent to about 10% of Saudi Arabia's normal exports, according to Bloomberg calculations. The disruptions heighten market concerns about potential supply tightness amid geopolitical volatility.
Attacks also reportedly affected pumping stations serving the East-West pipeline, the route Saudi Arabia uses to transport oil through the Red Sea. As a result, daily throughput dropped by 700,000 barrels this week. Kuwait also reported intercepting drone attacks and stated that several vital facilities were targeted.
At the policy level, countries dependent on Middle Eastern supplies are starting to build buffers. Japan said it will release approximately 20 days of oil supplies from its reserves in May. The United States is also offering up to 30 million barrels from its Strategic Petroleum Reserve (SPR) through a swap scheme to help cushion rising energy costs caused by disruptions in the region.
Market focus is now on developments in the Strait of Hormuz, a strategic waterway that has been disrupted since late February and disrupted the flow of approximately one-fifth of global oil and LNG supplies, triggering a supply shock. US President Donald Trump expressed optimism about a deal with Iran, but also warned Tehran against alleged tanker charges. A meeting between a US delegation led by Vice President JD Vance and Iranian officials on Saturday is expected to be crucial for normalizing energy flows.
5 key points:
- Oil rose for two days on news of Saudi capacity disruptions, but remains headed for its biggest weekly decline since June.
- Saudi Arabia said production capacity fell by around 600,000 bpd due to infrastructure attacks; East-West pipeline throughput dropped by 700,000 bpd this week.
- Supply risks are increasing, particularly for Asian markets, due to disruptions to export routes that bypass the Strait of Hormuz.
- Japan and the US are starting to rely on reserves: Japan released around 20 days of stock in May; the US is offering up to 30 million barrels from the SPR via swap.
- Market focus is shifting to the Strait of Hormuz and US-Iran talks, amid the threat of tanker passage costs and unrecovered energy flows. (asd)
Source: Newsmaker.id
