Saudi Pipeline Restoration Eases Surge in Oil Prices

International oil prices, which had soared for days, pulled back on the 16th (local time) after Saudi Arabia moved to restore an oil pipeline idled by drone attacks from Yemen's Houthi rebels and was reported to be planning to increase crude shipments through Oman. Still, concerns remain that prices will have difficulty falling below $100 per barrel, as the Houthis' offensive against the Saudi mainland continues and Russia's diesel export ban has been extended.

Saudi Arabia is aiming to restore half of the pipeline's transport capacity within days. In addition to the pipeline restoration, it is increasing shipments via Oman. According to reports, Aramco plans to deliver through Omani ports the crude volumes pre-ordered by refiners in China and elsewhere in Asia by October.

Surging oil prices actually reversed course on the day. Brent crude, the international benchmark, fell 2.69% from the previous day to $105.83 per barrel, while West Texas Intermediate (WTI) closed down 3.21% at $102.43 per barrel. Brent had risen to $108.75 the previous day, approaching the $110 mark.

To ease supply concerns, the United States also made contact with the Houthi rebels. According to reports, U.S. and Houthi delegations met at the U.S. Embassy in Muscat, the Omani capital, over the weekend with Oman acting as mediator. The Houthis reportedly conveyed that they have no intention of attacking U.S. vessels and will abide by the ceasefire agreement reached last year.

In a report on the day, Citibank noted that "the upward momentum in international oil prices is likely to persist in the short term until the Strait of Hormuz is reopened by the fourth quarter of this year thanks to international diplomatic efforts." The analysis suggests upward pressure on oil prices will continue until geopolitical tensions in the Middle East are resolved.