Oil prices fell Wednesday, retreating after a two-day rally, once an unexpectedly large U.S. crude inventory build offset lingering Middle East supply disruptions. Brent and WTI both pulled back from their highest levels since May 19, even as Saudi pipeline damage and thin Strait of Hormuz traffic kept a floor under prices.
Brent crude futures fell $1.22, or 0.67%, to $107.53 a barrel at 0655 GMT on Wednesday. U.S. West Texas Intermediate futures dropped $1.64, or 1.55%, to $104.19 a barrel over the same window. Both benchmarks had settled more than $3 higher on Tuesday, their highest levels since May 19, after the Yanbu loading suspension stoked supply concerns and Saudi Arabia cut oil shipments to Europe.
Inventory build outweighs tight physical market
U.S. crude inventories rose by 7.1 million barrels in the week ended September 11, market sources said, citing American Petroleum Institute data. That compared with analysts' expectations for a draw of about 1.6 million barrels, according to a Reuters poll. Gasoline and distillate inventories rose as well.
Haitong Futures said in a note that the unexpected builds in gasoline and diesel weighed on prices, but regional stock increases do not change the underlying tightness in the global crude market. Despite the inventory pressure, prices remained resilient as traders focused on disruptions to physical supplies, said Priyanka Sachdeva, head of market insights at Phillip Nova, in a report Wednesday. According to Sachdeva: "disruption to Saudi Arabia's East-West pipeline and Yanbu export infrastructure" remains the bigger concern.
Saudi pipeline damage still constrains flows
Oil loadings at Saudi Arabia's Yanbu port were suspended after the world's biggest crude exporter shut its East-West pipeline, following an attack by Yemen's Iran-aligned Houthis on Friday. Saudi Arabia is now offering more crude loadings to Asian refiners via ship-to-ship transfers off Oman's Sohar port, people familiar with the matter said Wednesday. European diesel futures rose to a record high on Tuesday, highlighting tightness in fuel markets as the disruptions constrain crude and product flows.
Hormuz traffic stays thin
Visible vessel transits through the Strait of Hormuz stood at four on Tuesday, down from seven a day earlier, preliminary shipping data showed Wednesday, well short of the 10-day average of 18. The drop in traffic through the waterway, which handled a fifth of the world's oil and liquefied natural gas supply before the U.S.-Israeli war on Iran started, comes after attacks in the region intensified.
Source: Investing.com
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