DTN Oil Update

Barani Krishnan
DTN Refined Fuels Market Reporter

VIENNA (DTN) -- Oil prices continued to retreat Thursday morning on easing supply concerns amid reports of Saudi Arabia establishing workarounds to the recent supply disruption from the Red Sea.

By 9:12 a.m. EDT, ICE Brent for November delivery was down $3.34 to trade near $102.49 bbl, and NYMEX WTI for October delivery fell $2.11 to $100.32 bbl. In early morning trade, the contract slipped below $100 bbl for the first time since Friday.

Downstream, NYMEX ULSD for October delivery retreated $0.1590 to $5.0875 gallon, and front-month RBOB futures slid $0.0663 to $3.4187 gallon.

The U.S. Dollar Index softened by 0.165 points to 99.815 against a basket of foreign currencies.

Reports on Wednesday suggested Saudi Arabia was offering more crude oil cargoes via ship-to-ship transfers off Oman to compensate for the loss of exports from its Red Sea port of Yanbu. Shuttling oil to tankers outside of the Persian Gulf has been one of the ways Middle Eastern oil was able to bypass Iran's blockade of the Strait of Hormuz.

The 7 million bpd capacity East-West pipeline, Saudi Arabia's primary workaround, was forced shut after being damaged by multiple drone attacks Friday, cutting Yanbu off its only source of crude oil. Estimated storage levels at the port were enough to sustain exports for a few days before loadings were suspended on Wednesday.

Rumors that the country was seeking to restore around half of these flows within the coming days by bypassing the damaged pipeline sections also weighed on prices. Riyadh continued to keep the market in the dark about a timeline for the repairs needed to return to full capacity, but experts estimate that this could take weeks to months.

U.S. government data released Wednesday, meanwhile, showed domestic refiners were still running far above the typical seasonal pace amid near-record high diesel cracks stemming from the global refined fuels supply crunch. The Energy Information Administration said distillate fuel oil inventories rose for a third straight week, but were still tight by historical standards, lagging year-ago levels by 13.5%.