LONDON (Sept 18): Oil prices fell 2% on Friday, extending losses for a third straight session as easing concerns over Saudi supply disruptions outweighed anxiety about a widening of conflict across the Middle East.

Brent crude futures LCOc1 fell by US$2.14, or 2%, to US$102.68 a barrel by 0806 GMT. US West Texas Intermediate CLc1 futures fell US$1.83, or 1.8%, to US$100.08.

Benchmark Brent prices are on track for their first weekly loss in three.

Immediate concerns over supply tightness have been eased by a combination of Saudi Arabia loading more crude via Oman, a build in oil product inventories in the US, Singapore and Europe, plus increased fuel exports from China, said PVM Oil Associates analyst Tamas Varga.

"While continuous pre-weekend profit-taking cannot be ruled out, the current fundamental outlook would not justify a prolonged fall below US$100 (a barrel) basis Brent," Varga added.

Markets largely shrugged off concerns even as Saudi Arabia and Yemen's Iran-backed Houthis exchanged fresh strikes across their border on Thursday, expanding the Middle East war front.

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.

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.

"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.

Iran's Revolutionary Guards Navy said a Togo-flagged oil tanker was struck while attempting to make "illegal passage" through the Strait of Hormuz on Thursday, Iranian state media said early on Friday.

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. 

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