Oil Holds Drop as Saudi Arabia Seeks to Restore Pipeline

Oil prices held their significant drop following indications that supply disruptions in the Middle East are set to ease, as Saudi Arabia works to restore its vital East-West pipeline. West Texas Intermediate (WTI) fell towards $102 a barrel, after a 3.2% decline on Wednesday, the largest since August 4. Brent crude traded near $106 a barrel, having lost 2.7% on Wednesday.

Saudi Arabia aims to restore approximately half the capacity of its damaged East-West pipeline within days, with full operations expected within six weeks. The pipeline, which transports oil across Saudi Arabia to its Red Sea coast, was damaged in attacks last week. This restoration effort helps mitigate fears of supply shortages and follows a year where crude prices have surged by about three-quarters due to the US-Iran war impacting Middle East flows and the ongoing Russia-Ukraine conflict.

Despite the positive news of pipeline restoration, some analysts remain cautious. Haris Khurshid, chief investment officer at Karobaar Capital LP, commented that while the market is regaining some capacity, it is not regaining its margin for error. The East-West pipeline has become a crucial alternative to shipments through the Strait of Hormuz, which remains a contested area between Washington and Tehran. US Energy Secretary Chris Wright noted that 18 million barrels of crude and products passed through Hormuz one day earlier this week, with a seven-day average of 11 million barrels a day, while Clarksons Research estimated the daily figure at about 8 million barrels.

The broader geopolitical context includes President Donald Trump's upcoming meeting with Persian Gulf leaders next Tuesday in New York to discuss the conflict, and his statement that the war will end "very soon." In the US, Congress has approved a bill granting Trump new powers to impose tariffs on countries purchasing Russian petroleum products, including China and India. Meanwhile, Ukraine continues drone attacks on Russian refineries, leading Moscow to ban most diesel exports to prioritize domestic supplies.