Oil prices fell on Wednesday, retreating after two consecutive sessions of gains as an unexpectedly large increase in U.S. crude inventories weighed on the market, while disruptions in Saudi Arabia and Libya kept concerns over global supply elevated.
West Texas Intermediate crude fell about 1.6% to $104.19 a barrel, while Brent crude declined to $107.53 in early trading. Both benchmarks had settled more than $3 higher on Tuesday, reaching their highest levels since May 19.
The pullback followed industry data showing U.S. crude inventories increased sharply last week, providing some relief to a market that has been increasingly focused on potential supply shortages from the Middle East.
U.S. Crude Inventories Jump 7.1 Million Barrels
U.S. crude inventories increased by 7.1 million barrels in the week ended Sept. 11, according to market sources citing data from the American Petroleum Institute.
The increase contrasted with expectations for a decline of about 1.6 million barrels in a Reuters survey. Gasoline and distillate inventories also rose during the week.
Official inventory figures from the U.S. Energy Information Administration are due later Wednesday and will provide a more complete picture of domestic supply and fuel demand.
The unexpected stock build helped offset some of the upward pressure that has pushed crude prices sharply higher in recent sessions.
Saudi Pipeline Outage Keeps Supply Concerns Elevated
Despite Wednesday’s decline, physical supply disruptions remain a significant factor for oil markets.
Saudi Arabia’s East-West Pipeline, an important route connecting the kingdom’s eastern oil-producing regions with the Red Sea, remains offline following attacks on the system.
The pipeline has become particularly important as disruptions around the Strait of Hormuz have complicated traditional export routes from the Persian Gulf.
Estimates for how long the pipeline will remain unavailable vary significantly. U.S. Energy Secretary Chris Wright said Tuesday that he expected the disruption to last only a matter of days. Other assessments have indicated repairs could take considerably longer.
Saudi Arabia also suspended loadings at the Red Sea port of Yanbu, contributing to Tuesday’s oil rally. The disruption has already affected exports to Europe, with Saudi shipments reduced as the kingdom adjusts its distribution network.
Reuters reported later Wednesday that Saudi Arabia was offering additional crude through ship-to-ship transfers off Oman’s Sohar port, providing another route for barrels and helping ease some immediate supply concerns.
Bab el-Mandeb Adds Another Risk to Global Oil Flows
The escalation in Yemen is adding another layer of uncertainty.
Iran-backed Houthi forces have expanded operations along Yemen’s Red Sea coast, increasing concerns surrounding the Bab el-Mandeb Strait, the narrow waterway connecting the Red Sea with the Gulf of Aden.
The route has taken on greater importance for Saudi exports as shipping through the Strait of Hormuz has been disrupted. Houthi forces have also intensified missile and drone attacks against Saudi targets.
The possibility of simultaneous disruptions around Hormuz and Bab el-Mandeb represents a particularly important risk for global energy markets because the two waterways connect major Middle Eastern producers with customers in Asia and Europe.
Libya Adds to Supply Disruptions
Supply concerns were also reinforced by developments in Libya.
Operations at three Libyan oilfields were halted this week, adding another source of disruption as markets were already responding to reduced Saudi exports and uncertainty surrounding Middle Eastern shipping routes.
For now, however, the sharp increase in U.S. inventories and Saudi Arabia’s efforts to redirect barrels through alternative export channels have provided some counterweight to those geopolitical risks.
That balance helped pull crude prices back Wednesday after two sessions of strong gains, while leaving both Brent and WTI substantially above levels seen before the latest escalation in Middle East supply disruptions.
