MONTREAL (Oil Monster): Oil prices fell Monday as recovering Middle East crude exports and a coordinated release of emergency petroleum stocks by Group of Seven countries eased immediate concerns over global supply.
Brent crude futures were down 43 cents, or 0.4%, at $101.82 per barrel by 1326 GMT, while U.S. West Texas Intermediate crude fell $1.50, or nearly 1.7%, to $89.61.
The decline came despite continuing attacks on energy infrastructure and commercial shipping in the Gulf, leaving traders balancing improving physical crude availability against persistent geopolitical and logistical risks.
The Group of Seven agreed Friday to coordinate the release of 100 million barrels of crude oil, diesel and other petroleum stocks through the International Energy Agency.
The releases are expected to take place over a four-month period, with a significant portion of diesel supply front-loaded during the first 20 days.
G7 members also pledged to avoid restrictions on energy exports as governments attempt to increase the amount of fuel available in international markets.
The action has reduced some immediate concern about supply shortages, particularly as global diesel inventories remain tight.
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Improving exports from Gulf producers are also weighing on crude prices.
Shipping data showed Middle East crude exports exceeded prewar levels on four of the seven days in the final week of September.
Provisional Kpler data showed the seven-day moving average for regional crude exports reached approximately 18.3 million barrels per day on September 30.
That compares with average regional exports of roughly 18 million bpd during the 12 months before the conflict involving the United States, Israel and Iran began in late February.
The improvement has been driven largely by Saudi Arabia increasing shipments through both Gulf and Red Sea export routes.
Saudi Arabia has been gradually restoring crude exports following severe disruptions earlier in the conflict.
The kingdom resumed shipments through its East-West Pipeline and the Red Sea port of Yanbu while also increasing tanker movements through the Strait of Hormuz.
The combination has allowed Saudi export volumes to move closer to levels seen before the war.
Saudi Aramco has also cut its November crude selling prices for Asian buyers to six-year lows, adding another signal that the producer is seeking to support export volumes and defend market share.
The rise in exports has eased the physical crude shortage, but transportation remains significantly more difficult and expensive than before the conflict.
Tankers operating through the Strait of Hormuz continue to face heightened security risks, while operators are relying on ship-to-ship transfers, alternative export routes and vessels operating with reduced tracking visibility.
Shipping and insurance costs also remain elevated.
That means additional barrels are reaching the market, but often through less efficient and more expensive logistics networks.
Security conditions remain unstable even as exports recover.
Several commercial vessels have been attacked in and around the Strait of Hormuz in recent days, reinforcing concerns over the safety of one of the world's most important energy shipping corridors.
Shipping intelligence services have warned that increased traffic through the strait is exposing more vessels to unpredictable security threats.
The continued attacks limit how far the physical supply recovery can reduce the geopolitical risk premium embedded in oil prices.
Yemen's Houthis said they launched ballistic missiles and drones at Saudi Aramco facilities in Riyadh and the Khurais area in response to Saudi-led air and missile strikes in Yemen.
Saudi authorities had not confirmed damage from the claimed attacks at the time of reporting.
The claims came as Yemen's internationally recognized government launched a new military campaign aimed at recapturing territory held by the Iran-backed Houthis.
Renewed fighting raises the risk of additional attacks on energy infrastructure and shipping routes around both the Persian Gulf and Red Sea.
Although governments are releasing emergency reserves, global crude and refined-product inventories remain heavily depleted following months of supply disruption.
Saudi Aramco CEO Amin Nasser warned Monday that rebuilding global oil inventories could take as long as two years.
Nasser said nearly 3 billion barrels of supply have been lost since the conflict began, while approximately 1 billion barrels have been released from global stockpiles.
He estimated replenishing inventories could create an additional requirement of roughly 2 million barrels per day over the next 18 months.
The recovery in crude exports has not resolved shortages across global fuel markets.
Diesel and other refined products remain particularly constrained because of refinery disruptions in the Middle East and Russia.
That difference helps explain why Brent remains above $100 per barrel even as headline crude exports improve.
G7 governments have placed particular emphasis on diesel in the latest emergency release because refined-product availability remains one of the weakest parts of the global supply system.
The price decline also follows Sunday's OPEC+ decision to leave November production targets unchanged.
Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman agreed to maintain their existing production ceilings.
However, actual production remains substantially below those targets because several producers continue to face export and infrastructure constraints.
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The Middle East conflict has also disrupted OPEC+'s planned review of member production capacity.
The assessment is important because it will help determine how the group allocates production quotas in 2027.
Damage to infrastructure and delays to capacity-expansion projects have made it more difficult to estimate how much oil individual producers will realistically be able to pump next year.
That uncertainty has reduced the likelihood of major changes in OPEC+ policy before the review is completed.
Another potential constraint on global fuel supplies is coming from Russia.
Ukrainian President Volodymyr Zelenskiy said Ukraine intends to continue attacks on Russian oil refineries.
Damage to Russian refining capacity has already tightened international diesel and petroleum-product markets.
Further refinery disruptions could therefore offset some of the relief created by improving Gulf crude exports and emergency stock releases.
The immediate oil-market balance has improved, but several major risks remain unresolved.
Traders will be watching whether Middle East crude exports remain at or above prewar levels, whether tanker attacks intensify and how quickly G7 emergency barrels reach the market.
The durability of Saudi export recovery will also be important, along with the condition of alternative routes such as the East-West Pipeline.
For now, improving crude supply is putting downward pressure on prices, but persistent logistical and refined-product constraints continue to keep the broader oil market tight.
Sources: Reuters; Kpler; G7; Saudi Aramco.
Courtesy: www.reuters.com
