Oil steadied after losing about 2 per cent on Monday, as rising Persian Gulf exports and a price cut by Saudi Arabia pointed to a looser market.
Global benchmark Brent traded little changed near $101 a barrel, while West Texas Intermediate steadied below $90. Gulf producers are moving larger volumes through the Strait of Hormuz, with more tankers taking the risk of navigating the contested waterway despite still-elevated risks.
Kuwait said it is pumping oil about 75 per cent of the level seen before the Iran war, while Iraq is seeking to hire additional vessels to send its cargoes through Hormuz. The moves come as Saudi Aramco cut the price of its flagship Arab Light grade for Asian buyers to a six-year low to push for market share.
Brent remains about 65 per cent higher this year after the US and Israel attacked Iran in February, disrupting supplies and fueling inflation. While oil flows from the Middle East have rebounded toward pre-conflict levels, product markets remain particularly constrained, in part due to Ukrainian strikes on Russia. That’s prompted the Group of Seven and partners to add to stockpile releases.
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In Yemen, Saudi-backed forces seized the Red Sea city of Mocha from Iranian-backed Houthis as they push toward the Bab el-Mandeb chokepoint, a key maritime route for Saudi exports. In recent months, the Houthi escalations against Riyadh have damaged energy infrastructure and tankers.
Although recovering flows, the Saudi Arabian price cuts and emergency stockpile releases are weighing on crude, escalating fighting in Yemen and risks of further attacks are limiting declines, according to Naohiro Niimura, a partner at energy consultancy firm Market Risk Advisory Co.
“Concerns on supply persist, making it difficult for the market to hold short positions for long,” he said, referring to wagers on losses.
Later Tuesday, the US Energy Information Administration is due to release its short-term energy outlook, including expectations for fuels over the Northern Hemisphere winter. The perspective will provide insights into diesel and heating-oil conditions at a time of acute market stress and record prices.
On fuels, US president Donald Trump eased restrictions on tax-exempt dyed diesel in a bid to lower costs. The long-expected move — which came ahead of midterm elections next month — allows wider use of the product.
“You have to wonder if the Iranians will try to take advantage of the period leading up to the midterm elections,” Robert Yawger, director of the energy-futures division at Mizuho Securities, wrote in a note. “The situation is fraught with danger, and high energy prices are the price to be paid.” - Bloomberg
