Oil dropped after Saudi Arabia cut prices of its benchmark grade to Asia as flows expand, offsetting a lift from intensified fighting in Yemen. Brent fell toward $101 a barrel, while West Texas Intermediate was near $90. Saudi Aramco will lower Arab Light to buyers in Asia to $5 a barrel less than the regional benchmark this month.
That’s the lowest since 2020, and was fully at odds with expectations from traders and refiners, who had flagged a $5 rise. In Yemen, the Riyadh-backed government launched a full-scale military push to recapture areas under Houthi control, supported by Iran. The militant group has targeted vital energy infrastructure in Saudi Arabia.
Crude has rallied strongly this year after the US and Israel attacked Iran, igniting months of conflict and fanning inflation. Flows of oil have been recovering toward pre-war levels, though product shipments remain constrained. The Group of Seven and its partners announced a further release of emergency stockpiles.
Saudi Aramco’s official selling prices have been exceptionally volatile since the outbreak of the Iran war in February. While flows through the Strait of Hormuz have picked up, risks to shipping remain acute, with attacks reported in recent days. Among them, the UK Maritime Trade Operations received a report of an incident within Hormuz on Oct 4.
A separate incident was also reported off Yemen’s Al Mukha in the Red Sea. Control over Yemen’s strategic western coastline toward the Bab el-Mandeb chokepoint is key to the fighting. Pipeline, refinery and loading infrastructure remains vulnerable to attacks by the Houthis, said June Goh, senior oil market analyst at Sparta Commodities SA.
That stands to make it difficult for Saudi Arabia to maintain production at high levels to supply the market via the Red Sea. Elsewhere, major OPEC+ nations agreed to keep production quotas unchanged next month, in line with an existing output roadmap. The Iran war has blunted the impact of the group’s decisions because supply in some members remains below levels pumped before the conflict.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing