Crude futures retreated in after-hours trading on Wednesday as Saudi Arabia offered additional crude cargoes to Asian refiners via Oman, easing concerns about attacks that disrupted a key pipeline carrying oil to the Red Sea.
Front-month West Texas Intermediate futures tumbled 3.4% to $102.05 per barrel, while Brent futures were down 3% to $105.51/bbl.
The US Energy Information Administration said in its weekly report commercial crude oil inventories decreased by 600,000 barrels to 423.4 million barrels in the week ended Sept. 11, noting that crude inventories are 1% above the five-year average.
The draw contrasted with a 7.1 million-barrel build reported by the American Petroleum Institute on Tuesday.
Gelber & Associates strategists said October WTI trades at $102.89/bbl as expectations for a faster partial restart of East-West Pipeline encourage traders to reduce the disruption premium built up during the recent rally.
On the supply front, the growing tightness in diesel markets, including in the US, China and Russia, has raised speculation about possible US export controls on crude oil and refined products.
Tom Kloza, chief energy adviser at Gulf Oil, said diesel was showing a sharp divergence in performance, with the midmorning Wednesday gross refining margin for diesel in New York at $116.77/bbl.
Kloza said the nationwide retail margin is 5.4 cents per gallon, about $2.27/bbl for fuel marketers and truck stops.
The Trump administration is reportedly opposing a diesel export ban, saying the idea would do little to lower prices.
ING strategists said that while a ban on refined products may offer some immediate price relief, it would weigh on refinery margins and eventually lead refiners to reduce run rates.
Meanwhile, Saudi Arabia is offering additional crude cargoes to Asian refiners through ship-to-ship transfers off Oman's Sohar port, according to media reports.
The arrangements allow Saudi crude to be transferred outside the Strait of Hormuz, providing an alternative route after damage to the East-West pipeline disrupted exports through Yanbu.
US Energy Secretary Chris Wright also said the pipeline should be back in operation within days, although other estimates suggest repairs could take considerably longer.
Kpler strategists said that the attack on Saudi Arabia's East-West Pipeline marks another escalation in a conflict the global oil market cannot absorb indefinitely.
The analysts said that without the East-West Pipeline, Saudi crude exports could ultimately fall by about 3.5 - 4 million barrels per day, depending on the severity and duration of the disruption.
The Federal Reserve approved its first interest rate hike since July 2023, while indicating that another will come later in the year. The Fed increased its key interest rate by a quarter percentage point, or 25 basis points.