LONDON (Oct 6): Oil dropped over 2% on Tuesday as rising Middle Eastern crude exports and a G7 emergency stockpile release eased supply concerns, though lingering security risks in the region capped further losses.
Gulf oil flows excluding Iran surged to over 81% of pre-war levels in September, data showed. Saudi Arabia's energy minister said oil pumped through the East-West Pipeline, which was hit by a drone attack last month, reached 5.8 million barrels.
Brent crude futures were down US$1.70, or 1.7%, at US$98.62 a barrel at 1013 GMT, while US West Texas Intermediate crude futures fell US$1.83, or 2.1%, to US$87.60.
On Monday, Saudi-backed Yemeni government forces staged an advance to retake the coast around the Bab el-Mandeb Strait up to the city of Mocha, the government said. This also eased market concerns of disruptions to oil supplies.
"For now the assumption of more crude getting through has dampened price fervour," said John Evans of oil broker PVM, referring to Middle East exports.
"The success of Saudi-backed Yemeni forces in retaking lands lost to Houthi rebels ... is playing a part in keeping the East-West pipeline secure and giving a notion that navigation might just be slightly freer from threat."
While the market remains nervous about potential supply disruptions from the region, Gulf oil producers continue to adapt to the region's situation, ING analysts said in a Tuesday note.
"Kuwait said that it is producing at 75% of pre-war levels, while the Saudis also cut the official selling price of their Arab Light into Asia for November loadings, a sign of an improving supply picture," they said.
Further easing supply concerns, G7 countries agreed on Friday to release 100 million barrels of diesel and crude from emergency reserves and pledged to refrain from energy export restrictions after pressure from US President Donald Trump.
Still, the conflict between Saudi Arabia and Houthi forces continued to fuel concerns over potential disruptions to supply.
Saudi Arabia's airports in Jazan and Najran were hit in two attacks on Monday evening, injuring three people and causing limited damage, the Saudi aviation authority said, as the hostilities between the kingdom and Houthis escalated.
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