Oil Price Today (September 17): Crude oil falls below $105 even as Middle East tensions simmer. Here’s why

Oil prices fell in early trade on Thursday, extending the previous session’s decline, after reports that Saudi Arabia was offering additional crude cargoes through Oman eased concerns over supply disruptions in the Middle East.

The latest move came after Saudi Arabia offered more crude loadings to Asian refiners through ship-to-ship transfers off Oman’s Sohar port, Reuters stated. The additional shipments are helping offset some of the supply impact from attacks on Saudi Arabia’s East-West pipeline, which runs to the Red Sea.

Crude oil price on September 17

Brent crude futures fell $1.25, or 1.22%, to $104.62 a barrel, while U.S. West Texas Intermediate futures declined $1.16, or 1.2%, to $101.20 a barrel. Both benchmarks had dropped by about $3 on Wednesday.

Oil had climbed to around four-month highs earlier this week after shipping industry sources said crude loadings at Saudi Arabia’s Red Sea export hub of Yanbu had been suspended. Riyadh had also cancelled some crude cargo deliveries to European customers, according to traders. The disruptions followed attacks on the East-West pipeline, which supplies Yanbu.

Also read: Iranian strikes damaged 3 US bases in Gulf: Report

Yanbu became Saudi Arabia’s main oil export outlet after Iran began blockading the Strait of Hormuz following U.S. and Israeli attacks on the country at the end of February. Before the war, the Strait of Hormuz carried one-fifth of the world’s oil supply.

Two pumping stations connected to the East-West pipeline were damaged in an attack last week, while the timeline for repairs remains unclear, according to assessments from three oil and security sources.

Despite Thursday’s decline, concerns over the widening Middle East war remain. Saudi warplanes struck Yemen, while Houthi fighters launched drones and missiles at Saudi cities on Wednesday, according to the Iran-backed movement, following a rapid advance that has expanded Tehran’s reach in the Middle East conflict.

Crude petroleum has gained roughly 75% so far this year, driven by the U.S.-Iran conflict, which has restricted Middle Eastern oil flows, as well as the continuing Russia-Ukraine war.

But risks remain

The prospect of additional disruptions has increasingly tilted the risks for oil prices to the upside. Daan Struyven, co-head of global commodities research at Goldman Sachs, said recent attacks showed that shipping disruptions could spread and become more severe.

Goldman Sachs has outlined a scenario in which oil prices could rise as high as $120 a barrel if attacks on vessels in the Middle East intensify. If exports return to normal, the bank expects oil prices to fall back toward $80 a barrel. Struyven told Bloomberg that shipping risks had emerged as an important driver of oil prices.

Struyven said Goldman Sachs sees "meaningful upside to crude oil prices" and also expects natural gas and refined product prices to increase. He added that supply shocks in gas and fuels are larger than those in the crude market.

How long the disruption lasts will be crucial for oil prices. JPMorgan estimates that every additional month of disruption could add around $7 to $8 a barrel to Brent prices. If the disruption persists for three months, the bank expects average monthly Brent prices to reach around $114 a barrel.

Read more: US officials met Iran-backed Houthis in Oman over the weekend, sources say

Citi has raised its average Brent crude price forecast for the third quarter to $86 a barrel from $80, citing a longer-than-expected timeline for the reopening of the Strait of Hormuz.

ANZ analysts have also raised their short-term Brent forecast to $95 a barrel and warned that prices could move higher if the Middle East conflict escalates. They said a prolonged standoff involving calibrated military action by the U.S. and Iran appeared to be the most likely scenario, potentially delaying the return of full Middle Eastern supply.

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