…slipped to $107.82 a barrel at 0028 GMT Wednesday

 

 

Oil prices fell on Wednesday after an unexpected surge in U.S. crude inventories offset concerns over tightening global supplies following disruptions to Saudi Arabia’s key East-West oil pipeline.

Brent crude futures declined 93 cents, or 0.86%, to $107.82 a barrel at 0028 GMT, while U.S. West Texas Intermediate (WTI) fell 97 cents, or 0.92%, to $104.86 a barrel.

The pullback followed a sharp rally on Tuesday, when both benchmarks gained more than $3 and reached their highest levels since May 19. The earlier gains were driven by Saudi Arabia’s suspension of oil loadings at the Red Sea port of Yanbu and the cancellation of some shipments to European buyers.

US inventories surprise market

The immediate pressure on crude prices came from the latest inventory data from the American Petroleum Institute (API).

U.S. crude stocks increased by 7.1 million barrels in the week ended September 11, according to market sources citing API data. Analysts surveyed by Reuters had expected inventories to decline by about 1.6 million barrels.

Gasoline and distillate inventories also increased, adding to the bearish signal from the U.S. data.

The size of the crude build was particularly significant because it came at a time when the global oil market is already facing supply disruptions and elevated geopolitical risk.

Market analysts at Haitong Futures said the increase in regional inventories did not necessarily eliminate the underlying tightness in global crude supplies, suggesting that the U.S. stock build could provide only temporary relief to consumers and refiners.

Saudi pipeline disruption remains a major risk

Despite the inventory build, supply concerns remain firmly in focus after Saudi Arabia suspended crude loadings at Yanbu.

The suspension followed an attack on the kingdom’s East-West pipeline, which transports crude from Saudi Arabia’s eastern oil-producing region to Yanbu on the Red Sea.

The pipeline has been particularly important because it provides an alternative export route to the Strait of Hormuz, where shipping activity has been severely disrupted by the wider regional conflict.

Saudi Arabia has been using the pipeline to redirect about 4 million barrels per day, equivalent to roughly 4% of global oil supply, toward the Red Sea.

The disruption has already affected Saudi export schedules, with the kingdom suspending Yanbu loadings and cancelling some late-September cargoes to Europe.

Physical crude markets have shown signs of greater stress than futures markets. Reuters reported that some European physical oil cargoes rose above $130 a barrel on Tuesday, as buyers sought alternative supplies following the Saudi disruptions.

Uncertainty over pipeline repairs

The duration of the Saudi pipeline outage remains uncertain.

The U.S. energy secretary said oil flows through the strategically important pipeline should resume within days. However, sources cited by Reuters offered different estimates for the repair period, with one suggesting repairs could take five to six weeks, while another said partial pumping could resume earlier as work continues.

The uncertainty is significant for the oil market because prolonged restrictions could further reduce the availability of crude for export through the Red Sea.

Earlier Reuters reporting indicated that Saudi Arabia had only several days of crude stocks at Yanbu available for exports following the pipeline shutdown, underscoring the importance of restoring flows or securing alternative routes.

Libya faces separate supply disruption

Oil supply risks are not limited to Saudi Arabia.

In Libya, the National Oil Corporation (NOC) said operations at three oil fields were suspended after members of the Petroleum Facilities Guard protesting over local grievances shut a valve on the Hamada-Zawiya crude export pipeline.

The disruption, however, has so far had limited impact on national output.

NOC Chairman Massoud Suleman told Reuters that Libyan production remained around 1.4 million barrels per day, indicating that the field shutdowns had not yet translated into a significant decline in overall national production.

Market caught between demand signals and supply risks

The latest price movement highlights the competing forces driving the oil market.

On one side, the unexpected increase in U.S. crude, gasoline and distillate inventories is raising questions about near-term demand and providing traders with a reason to lock in recent gains.

On the other, disruptions affecting Saudi Arabia, Libya and key Middle Eastern shipping routes are limiting the market’s ability to absorb further supply shocks.

That tension could keep oil prices highly volatile, particularly if the Saudi East-West pipeline remains offline for an extended period.

For oil-importing economies, including Nigeria, sustained crude prices above $100 a barrel could have mixed consequences. Higher prices can improve government and producer revenues in oil-exporting countries, but they can also increase fuel costs, inflationary pressure and the cost of imported petroleum products.

The immediate direction of the market is therefore likely to depend on whether the U.S. inventory build develops into a sustained trend and, more importantly, how quickly Saudi Arabia restores crude flows through its East-West pipeline.