Oil prices dropped Wednesday after International Energy Agency member states agreed to prioritize releasing diesel stocks to ease a global fuel supply crunch. The move follows a G7 pledge to tap diesel reserves, but earlier in the session crude had climbed on fresh Houthi strikes on Saudi Arabia and continued Iranian attacks on tankers in the Strait of Hormuz.
IEA agrees to prioritize diesel releases
Crude fell on Wednesday after IEA member states agreed to support the prioritisation of the release of diesel stocks given current tightness in diesel markets, IEA director Fatih Birol said in a statement. Brent crude futures dropped 66 cents to $99.92 a barrel, while WTI futures traded $1.34 lower at $88.10 per barrel.
IEA members have deployed about 325 million barrels of oil under the March emergency action plan addressing the supply disruption triggered by the Iran war, Birol said, leaving about 100 million barrels still unreleased under that plan. The member states still hold emergency stocks equivalent to 1.1 billion barrels, including more than 200 million barrels of diesel, and the IEA said it is ready to release more if required.
The IEA statement follows the G7 nations' agreement Friday to release diesel stocks under pressure from the Trump administration, though it remains unclear how much diesel will actually be deployed.
Houthi strikes keep supply risk alive
Earlier in the session, oil prices rose after Iran-backed Houthi militants in Yemen launched fresh strikes on Saudi Arabia, raising concern that the rebound in Middle East oil exports remains vulnerable. Oil pumped through the East-West pipeline had reached 5.8 million barrels as of Tuesday morning, according to Saudi Energy Minister Prince Abdulaziz bin Salman; the pipeline was closed in early September after a drone attack damaged it.
Saudi aviation authorities reportedly said the country's airports in Jazan and Najran were targeted in two attacks Tuesday, as hostilities between the Houthis and the kingdom escalate. Iran's move to step up attacks on tankers transiting the Strait of Hormuz has also renewed trader worries over crude oil supplies.
Naeem Aslam, chief investment officer of Zaye Capital Markets, said oil remains caught between improving physical supply and persistent geopolitical risk. Samer Hasn, senior market analyst at forex trading platform XS.com, said the Houthis' sustained ability to target oil facilities far from the border keeps the risk of a renewed large-scale crude supply disruption high. According to CNBC: "these risks could worsen if the Houthis feel the need to apply more pressure" as a result of losing more territory, Hasn said.
Source: CNBC
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