Global Oil Prices Drop Below $100 Amid Hopes of Strait of Hormuz Reopening and Saudi Pipeline Restart

Oil prices fell below $100 a barrel as hopes that Iran could reopen the Strait of Hormuz within days and the restart of Saudi Arabia’s East-West pipeline raised the prospect of more Middle East crude reaching global markets, easing fears of a prolonged supply squeeze.

Brent dropped 2.64 per cent to $97.69 a barrel, while West Texas Intermediate fell 3.20 per cent to $89.41 a barrel. Gasoline futures declined 2.1 per cent and heating oil slid 3.1 per cent. The S&P GSCI commodity index was down 1.5 per cent.

Iran is prepared to reopen the Strait of Hormuz within a week if the US eases military pressure and lifts its blockade of Iranian ports, a senior Iranian official told Reuters. Tehran has also submitted a proposal to Washington through mediators, raising hopes of a diplomatic breakthrough after nearly seven months of disruption to one of the world's most important energy corridors.

Saudi Aramco also restarted its East-West pipeline at a reduced rate, with crude exports from the Red Sea port of Yanbu expected to resume later in the day. The pipeline is the kingdom's principal workaround for Hormuz, carrying crude across the peninsula to Yanbu. It was shut on September 13 after drone attacks damaged pumping infrastructure.

Saudi Arabia has since sharply increased shipments through Hormuz. Saudi crude moving through the strait averaged 2.9 million barrels per day over six days to September 18, up from about 700,000 bpd in August, according to JP Morgan analysts citing satellite data. Aramco loaded about 14 million barrels of crude on seven very large crude carriers in the Gulf on Sunday, according to TankerTrackers.com data.

The rise in Saudi shipments pushed Brent below $100 on Monday for the first time since September 9. Saudi Arabia is transporting crude through a mix of direct voyages through the Strait of Hormuz as well as through ship-to-ship operations off the coast of Oman, mainly at Sohar in the Gulf of Oman, according to analysts.

“Crude is loaded in the Gulf onto shuttle tankers, taken through Hormuz, then transferred ship-to-ship off Oman, at Sohar in the Gulf of Oman,” Noureldeen Al Hammoury, chief market strategist at Equiti Group, said.

Saudi Arabia is expected to continue increasing eastern or Hormuz exports while alternative lines remain constrained, said Ana Subasic, trade risk analyst at Kpler. However, broader traffic through Hormuz remains severely constrained, with only two visible commercial vessels passing through the strait on Monday.

A sustained retreat in crude prices would offer relief to policymakers confronting an energy-driven inflation shock. The Federal Reserve raised interest rates last week, joining the European Central Bank and Bank of Japan in tightening monetary policy. US retail diesel has reached $6.50 a gallon, its highest level this year.

“The central bank moves this week are a rational response to an energy crisis that monetary policy cannot fix,” said Claudio Galimberti, chief economist at Rystad Energy. Traders are also positioning for Thursday's meeting between US President Donald Trump and Chinese President Xi Jinping in Washington.