Oil prices extended their decline for a third consecutive session on Friday, as optimism over Saudi Arabia's ability to repair damaged export infrastructure tempered the immediate supply shock, even though shipping through the Strait of Hormuz remains severely constrained. Brent crude slipped about 1% to near $104 a barrel, while West Texas Intermediate hovered around $101, both retreating sharply from this week's highs near $110 and $106, respectively.
Saudi repair hopes ease risk premium
The market's primary relief stems from Saudi Arabia's efforts to restore part of its East-West pipeline, which normally carries 3 to 4 million barrels per day to the Red Sea, offering an alternative to Hormuz. Riyadh is reportedly working to bring back roughly half of that capacity within days, with full repairs potentially taking around six weeks. Saudi Aramco has also offered additional crude to Asian buyers via ship-to-ship transfers near Oman, bolstering confidence that exports can continue despite the damage.
According to ANZ Research analysts, the prospect of returning Saudi volumes, combined with profit-taking after two weeks of gains, is helping pull crude lower. This shift indicates the market is moving away from pricing an immediate multi-million-barrel supply loss, though the physical market remains far from normal.
Hormuz disruptions persist
Despite the repair hopes, the Strait of Hormuz remains a critical unresolved risk. Preliminary data from Kpler shows only four commodity vessels passed through the strait on Thursday, compared with a 10-day average of around 16. Before the conflict escalated, the waterway handled roughly one-fifth of global oil and gas shipments. Iran's Revolutionary Guard has also claimed it struck a Togo-flagged tanker attempting to transit, keeping the threat of further disruption elevated.
Analysts note that while Saudi pipeline repairs should ease some physical pressure, continued restrictions around Hormuz and other global supply disruptions are likely to keep crude prices supported. This explains why Brent remains comfortably above $100 even after three days of losses, and why any renewed escalation could quickly reverse the latest decline.
US inventories and Fed policy complicate outlook
The US supply picture is more balanced than earlier private data suggested. Official Energy Information Administration figures showed commercial crude inventories fell by about 640,000 barrels last week to 423.4 million barrels, marking a third consecutive decline, though the draw was smaller than analysts had expected.
On the demand side, the Federal Reserve raised rates by 25 basis points this week and signaled that further tightening may follow, increasing concerns that higher borrowing costs could eventually slow fuel consumption. This dynamic is reflected in broader market moves, as seen in gold's rebound despite the hawkish Fed and the Nasdaq's climb as oil retreats.
For now, crude is caught between improving logistics and an unusually fragile supply system. Saudi repair progress may continue to pull risk premium out of Brent and WTI, but the physical flow of barrels through Hormuz remains the most important signal for oil's next move. Traders should watch for any further disruption or successful repair milestones that could shift the balance.
This article is for informational purposes only and does not constitute financial advice.
