Crude oil prices eased from a more than four-month high on Wednesday, pressured by a rise in US crude inventories and a modest recovery in cargo flows through the Strait of Hormuz.
Brent crude futures fell 1.3% to $107.36 per barrel, while Dubai 1st Line Futures slipped 1% to $97.05/bbl. Both contracts hit their highest since mid-May on Tuesday.
"Prices have eased this morning as some risk premium unwinds after the API reported a weekly rise in US crude and fuel stockpiles, while data showed flows through the Strait of Hormuz rising to their highest since June/July," Saxo Bank analysts said.
Data from the American Petroleum Institute revealed Tuesday that US crude oil inventories increased by 7.14 million barrels in the week ended Sept. 11.
The oil market now awaits the US Energy Information Administration's petroleum inventory report, scheduled for release on Wednesday.
However, underlying supply vulnerabilities persist across the Middle East.
Saudi Arabia reportedly canceled September crude cargoes to European buyers and suspended Yanbu loadings following drone attacks on its East-West pipeline, forcing the OPEC leader to reroute shipments through the Gulf of Oman.
Kpler noted that Saudi Arabia is shifting more crude loading to Gulf ports as Yanbu constraints grow, increasing exposure to the Strait of Hormuz.
Compounding these pressures, Iranian crude exports have plummeted to roughly 210,000 barrels per day in August due to ongoing blockades, down sharply from 2 million barrels per day earlier in the year.
Iran's oil exports have collapsed as the Hormuz blockade disrupts tanker flows, drains China's supply buffer and complicates any recovery, Claire Jungman, Director of Maritime Risk and Intelligence at Vortexa, said in a Tuesday note.
Meanwhile, additional supply concerns loom from a potential force majeure on deliveries tied to an attack on Libya's Hamada-Zawiya pipeline.
"It does feel like an environment where oil prices want to take another leg higher," Kpler noted.
In refined products, European gasoil futures, a key benchmark for diesel, touched their highest intraday levels since April before settling at record highs on Tuesday followed by some easing on Wednesday.
The Russian government has reportedly decided to extend its ban on diesel fuel exports until the end of October to ensure sufficient supplies for domestic markets, according to a report by Russia's Vedomosti newspaper, citing two sources familiar with the matter.