Oil prices sank to a two-week low on Tuesday as Saudi Arabia signalled it was preparing to restart its key East-West pipeline and resume crude exports from its Red Sea coast. Brent crude, the international benchmark, dropped nearly 3 per cent to below $98 a barrel. It was later trading at $98.11, taking its decline for the week to more than 5 per cent.

US WTI fell 3 per cent to $92.94 a barrel. On Tuesday, one person with knowledge of the situation confirmed reports that the pipeline would resume flows by the end of the week. Saudi Aramco, the national oil company, did not immediately respond to a request for comment.

Traders have also been selling oil on speculation that this week’s diplomatic meetings between Iran, China and the US would lead to a potential breakthrough in efforts to end the conflict in the Middle East. Speaking to Fox News on Sunday, President Donald Trump said he would “probably” be open to meeting Iran’s president this week. Oil prices had surged as high as $109.97 a barrel after Saudi Arabia shut down the East-West pipeline almost two weeks ago after a series of drone strikes destroyed pumping stations and caused a number of injuries.

The 1,200km pipeline, which runs from the kingdom’s main oilfields in the east to the Red Sea port of Yanbu in the west, has enabled Saudi Arabia to keep exporting oil despite Iranian attacks on ships passing through the Strait of Hormuz, the main route for Gulf oil to the world. It was unclear how much oil would be able to flow through the pipeline when it restarts. Its official capacity is about 7mn barrels of oil per day.

June Goh, an analyst at Sparta Commodities, said that if only a quarter of the flows through the pipeline were restored, no extra oil would be exported, since the flows would be used in Saudi Arabia’s own refineries on the west coast. If 40 per cent of the pipeline’s capacity is restored, there will be an additional 1mn barrels a day of crude on the market, she estimated. A large share of oil from Yanbu travels to European markets, and refineries in Europe were told last week they would not receive the cargoes that were allocated for October. “The East-West pipeline outage has flipped the geography of Saudi exports within two weeks,” said analysts at energy data company Kpler, noting that the kingdom had rapidly rerouted its oil to be exported through the Strait of Hormuz after the pipeline was blown up.

They noted that loadings at the Gulf port of Juaymah had increased fivefold from its rate in August and that every berth in the port had been occupied on September 20.