Oil pares losses as market weighs Saudi supply concerns, Middle East tensions

Oil prices pared earlier losses on Friday as markets assessed Saudi supply alongside concerns about a widening Middle East conflict. Brent crude futures fell by 33 cents, or 0.31%, to $104.49 a barrel by 1411 GMT. US West Texas Intermediate futures gained 88 cents, or 0.86%, to $102.79. Brent crude hit a session low of $101.92 a barrel, while WTI touched a session low of $99.39 before both benchmarks pared losses. Additionally, Chinese exports of refined oil products in August rose 12.7% year on year, with jet fuel exports hitting a record high, customs data showed on Friday. China is expected to continue to ease export controls in September, enabling it to profit from higher overseas margins. Refined product stocks grew by 3.7 million barrels last week, according to data in a Morgan Stanley note, driven by builds in the West and Singapore. "The key question is whether physical flows can normalise and what the timeline could be. If we see a sustained improvement in Hormuz traffic, some of the geopolitical premium can unwind further," said Priyanka Sachdeva, head of market insights at Phillip Nova. Transporting oil through the region remains risky, however. Four commodities vessels passed through the Strait of Hormuz in the Gulf on Thursday, below the 10-day average of about 16, preliminary shipping data showed on Friday. Three liquefied natural gas vessels also reappeared outside the Strait of Hormuz on Thursday, Kpler data showed. The figures could change as some ships typically switch off their transponders during the voyage to avoid the risk of detection in the conflict zone. The US and Iran have held no peace talks since the collapse of an interim agreement reached in June. The war will come up for discussion at the United Nations General Assembly next week, and an Iranian delegation will be able to attend, according to the US State Department. "Oil prices are being supported by ongoing tensions in the Middle East, with tankers being targeted in the Strait," said UBS energy analyst Giovanni Staunovo. Three pumping stations serving the vital East-West Pipeline in Saudi Arabia were damaged in an attack last week — one more than assessed previously — with a repair timeline unclear, according to satellite imagery and three industry sources. Saudi Arabia and Yemen's Iran-backed Houthis exchanged fresh strikes across their border on Thursday and Yemenis took to boats in the Red Sea to escape fighting, as the spreading Middle East war created new threats to global oil supplies. Oil company Saudi Aramco has told at least two European refining customers they will receive no crude oil next month following an attack on Saudi Arabia's key pipeline to the Red Sea, Bloomberg News reported on Friday, citing people familiar with the matter. Prices climbed to close to four-month highs earlier in the week after sources said crude loadings at Saudi Arabia's Red Sea export hub of Yanbu had been suspended and Riyadh cancelled some deliveries to Europe after its East-West pipeline was damaged in an attack last week. However, prices have cooled since on reports that Saudi Arabia was seeking to restore about half the capacity of its East-West oil pipeline within days. Sources that have spoken to Reuters have given varying estimates of how long it will take to reopen the pipeline and return crude flows to normal.

Oil pares losses as market weighs Saudi supply concerns, Middle East tensions

Oil prices pare earlier losses

Chinese exports and product stocks also in focus

Shipping through the Strait of Hormuz remains risky

Saudi supply disruptions and regional tensions support prices

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