Oil Prices Extend Losses As Saudi Oman Route Eases Supply Concerns

📊 Brent crude futures dropped 19 cents, or 0.2 percent, to $105.64 a barrel by 0347 GMT, while US West Texas Intermediate futures were down 33 cents, or 0.3 percent, at $102.10. Both contracts fell about $3 on Wednesday. The price decline follows several days of oil price surges driven by the Saudi East-West pipeline attack and broader Middle East supply disruption concerns.

🌏 "Concerns over supply tightness eased slightly following news that Saudi Arabia would ship cargo via Oman," said Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment. "Expectations of progress toward easing tensions in the Middle East ahead of US-China summit next week are also capping price gains," he added. The combination of Saudi supply rerouting and diplomatic progress expectations has provided modest relief to oil markets that had been under sustained upward pressure.

🚢 Saudi Arabia's Oman Rerouting Strategy

Saudi Arabia is offering more loadings of crude oil to Asian refiners via ship-to-ship transfers off Oman's Sohar port, people familiar with the matter said, blunting some of the hit to global supply from attacks on Saudi Arabia's East-West pipeline to the Red Sea. However, some analysts were expecting these flows to only ease a portion of the supply loss from the kingdom's Red Sea port, capping the declines in oil prices.

The pick-up in flows through the Strait of Hormuz "is only partly offsetting lost export barrels following drone attacks that shut Saudi Arabia's East-West pipeline," Saxo Bank analysts said in a note. The Oman rerouting — using ship-to-ship transfers in the Gulf of Oman, outside the most dangerous section of the Strait of Hormuz — provides a partial workaround for Saudi exports that would normally flow through the Yanbu Red Sea terminal. However, the transfer operations add cost and time, and the capacity is insufficient to fully replace the pipeline-routed volumes.

• 💰 Brent crude: $105.64/barrel (down 0.2%)
• 💰 WTI crude: $102.10/barrel (down 0.3%)
• 💰 Both contracts fell: ~$3 on Wednesday
• 🚢 Saudi rerouting via: Oman's Sohar port (ship-to-ship transfers)
• 📜 Pipeline damage: 2 pumping stations (repair timeline unclear)
• 📊> DBS base case Q4: Brent $85-95/bbl
• ⚠> DBS bear case: Brent could spike to $120/bbl

📜 Pipeline Attack Damage Assessment

Oil prices rose to about four-month highs earlier this week after shipping industry sources said crude loadings at Saudi Arabia's Red Sea export hub of Yanbu had been suspended and Riyadh had cancelled some cargo deliveries to European customers. The suspension followed attacks on the East-West pipeline, which feeds the Saudi port of Yanbu. Yanbu became Saudi Arabia's main outlet for oil exports after Iran began blockading the Strait of Hormuz after the US and Israel attacked the country at the end of February. Prior to the war, Hormuz was the conduit for one-fifth of the world's oil supply.

Two pumping stations serving the East-West pipeline were damaged in an attack last week, with a repair timeline unclear, according to assessments from three oil and security sources. The unclear repair timeline means that the pipeline-routed exports through Yanbu remain suspended indefinitely — keeping the structural supply loss in place even as the Oman rerouting provides partial, temporary relief.

⚠ Middle East War Intensifies Despite Price Decline

Despite the oil price decline on Thursday, worries about the intensifying Middle East war remain. Saudi warplanes pounded Yemen and Houthi fighters launched drones and missiles at Saudi cities, the Iran-backed movement said on Wednesday, after a lightning advance that has extended Tehran's reach in the Middle East war. The intensification of the Yemen conflict — with Saudi airstrikes on Yemen and Houthi missile attacks on Saudi cities — represents a further escalation of the broader Middle East war that began with the US-Israel attack on Iran in February.

💵 DBS Bank Scenarios: $85-95 Base Case, $120 Bear Case

Singapore's DBS Bank assumes in its base case scenario for the fourth quarter that the US war with Iran will dial down and Brent will stabilise in the $85 to $95 range. "However, under the bear case scenario currently prevailing, with attacks and incidents in Hormuz and Red Sea continuing, prices could spike towards $120/bbl levels before potentially normalising back towards $100/bbl," DBS Bank's head of energy research, Suvro Sarkar, said. The DBS assessment — identifying the bear case as "currently prevailing" — suggests that the bank's analysts view the current price trajectory as closer to the $120 spike scenario than the $85-95 stabilisation scenario.

🌏 Implications For Bangladesh

For Bangladesh, the oil price trajectory carries direct implications for the country's fuel import bill and broader macroeconomic management. At $105.64/barrel, Bangladesh's annual crude oil import cost (approximately 5 million tonnes) remains significantly elevated above pre-war levels. A further spike to $120/barrel — as DBS's bear case suggests — would add approximately $500-700 million to the annual fuel import bill, putting additional pressure on foreign exchange reserves and potentially forcing further domestic fuel price adjustments.

The partial relief from the Oman rerouting — while welcome — does not address the structural supply loss from the pipeline shutdown. Until the East-West pipeline is repaired or a sustainable alternative export route is established, oil prices will remain elevated and volatile, with the risk of a $120/barrel spike if further supply disruptions occur. For Bangladesh's economic planning, the DBS scenarios suggest that FY27 budget assumptions should incorporate elevated energy prices through at least the first half of 2027, with contingency planning for the $120/barrel bear case.