Oil Retreats as Saudi Supply Recovery Eases Disruption Fears 

Key Takeaways:

*Oil retreats as supply fears ease — Brent fell toward $104–$106, while WTI remained around $101–$102 as Saudi Arabia works to restore pipeline capacity and reroutes crude through Oman.

*Saudi supply recovery limits upside — Riyadh plans to restore around half of its East-West pipeline capacity within days, while alternative exports through Oman are helping offset disruptions.

*Shipping costs hit record highs — US Gulf-to-China crude freight reached $44.8 million per VLCC, highlighting continued disruption across global oil flows.

Market Summary:

Oil prices have entered a period of consolidation after the sharp rally earlier this week, with Brent around $104–$106 a barrel and WTI near $101–$102. The latest pullback has been driven primarily by signs that some Middle Eastern supply disruptions may be easing. Saudi Arabia is reportedly working to restore around half of its East-West pipeline capacity within days, with full operations potentially returning in roughly six weeks, while Riyadh has also increased crude availability to Asian refiners through ship-to-ship transfers off Oman’s Sohar port. Libya has also restored production following temporary field disruptions, reducing some of the immediate supply-shortage concerns that previously pushed Brent toward $110.

However, the physical oil market remains vulnerable to further disruptions. The Strait of Hormuz continues to operate well below pre-war levels, forcing refiners to source barrels from more distant suppliers. This has pushed transportation costs sharply higher, with the cost of shipping 2 million barrels of US crude from the Gulf Coast to China reaching a record $44.8 million, up from $39 million a day earlier and around $17.8 million before the Iran war began. Saudi Arabia has also delayed some deliveries to European customers following the East-West pipeline interruption, while crude loading outside the Persian Gulf has become significantly more expensive. Oman crude futures climbed above $130, highlighting how tight the physical market remains despite the recent decline in benchmark prices.

Supply risks are also extending beyond Saudi Arabia. Tensions around Yemen and the Houthi movement, including attacks affecting Saudi infrastructure and shipping routes near the Bab el-Mandeb Strait, remain a major geopolitical risk. At the same time, the diesel market remains particularly tight as Middle Eastern disruptions coincide with Ukrainian attacks on Russian refineries. US diesel futures reached a record high, while nationwide diesel inventories increased by around 1.6 million barrels but remained at their lowest seasonal level since at least 2000. These refined-product constraints are important because even if crude production and transportation gradually normalize, shortages of diesel and other fuels could continue supporting energy prices.

On the demand side, the Federal Reserve’s 25bp rate hike to 3.75%–4.00% and its hawkish outlook have strengthened the US dollar and raised concerns about economic activity and future oil demand. US crude inventories also provided mixed signals: official EIA data showed a 640,000-barrel draw, smaller than expected, while gasoline inventories increased. The stronger dollar and higher borrowing costs therefore provide a counterweight to the supply-driven rally. Overall, the latest decline in oil appears to reflect easing immediate supply fears and position adjustment rather than a complete removal of the geopolitical risk premium. Further progress on Saudi pipeline repairs and Middle Eastern supply routes could keep prices under pressure, while renewed attacks, prolonged Hormuz disruptions or worsening refined-product shortages could quickly restore upward pressure.

Technical Analysis 

CL-Oil, H4

Crude oil maintains a bullish structure with price continuing to trade above the ascending trendline and the key 92.85 support level. After the recent pullback from the 105.60 resistance zone, the latest strong bullish candle shows buyers stepping back in around the trendline,suggesting that the broader upward structure remains supported despite the short-term correction.The rebound has brought price back toward the 102.40 area, while the recent recovery indicates that demand remains present at lower levels. However, price still needs to regain the recent highs and overcome the 105.60 resistance zone to confirm a renewed upward move.

Momentum has weakened from its recent peak but remains relatively supportive. RSI has fallen back toward the neutral 50 area, reflecting the moderation in buying pressure, while MACD remains in positive territory despite the recent bearish crossover. This suggests that upside momentum has cooled, although the latest price rebound could provide an early sign of stabilization.

Resistance Levels: 105.60, 114.15

Support Levels: 92.85, 80.35