Oil Prices Pare Gains After Earlier Rise on Saudi News
Oil prices traded broadly unchanged on Thursday after an announcement that Saudi Arabia would suspend some oil shipping in the Red Sea had initially sent prices higher.
Brent futures had risen 19 cents to $74.12 a barrel by 1305 GMT, extending their rally into a third day but slipping from a 10-day high in earlier trading.
U.S. West Texas Intermediate (WTI) crude futures were down 2 cents at $69.28, hovering around Wednesday's closing level. Earlier in the day, it looked like WTI was set for a third consecutive day of rising prices.
Saudi Arabia, the world's biggest oil exporter, said on Thursday that it was "temporarily halting" oil shipments through the Red Sea shipping lane of Bab al-Mandeb after an attack by Yemen's Iran-aligned Houthi movement.
Saudi Arabia has a major export terminal in Ras Tanura - also home to the country's largest refinery - on its eastern coast. The kingdom exports most of its crude on tankers passing through the Strait of Hormuz.
The path through Bab al-Mandeb links Saudi Arabia's eastern trade partners and Ras Tanura with the Red Sea port of Yanbu, the Suez Canal and the SUMED pipeline.
"The market is waiting for an actual impact rather than just the headlines," said Hans van Cleef, senior energy economist at ABN Amro bank.
An estimated 4.8 million barrels per day (bpd) of crude oil and refined petroleum products flowed through this waterway in 2016 towards Europe, the United States and Asia, according to the U.S. Energy Information Administration.
But Saudi Arabia additionally has the Petroline, also known as the East-West Pipeline, which mainly transports crude from fields clustered in the east to Yanbu for export to Europe and North America.
The 5 million bpd Petroline could transport around 60 percent of Saudi oil exports.
Olivier Jakob from Petromatrix said in a note it remains to be seen whether the Saudi move has an impact on shipping costs.
"The passage is not as crucial as the Strait of Hormuz ... but restricted flows through it would have an impact not just for crude but also for products due to the longer voyage time that is needed to sail by the Cape," he said.
WTI was initially supported by official data showing U.S. crude oil inventories last week tumbled more than expected to their lowest level since 2015.
PVM strategist Tamas Varga said the draw was not as bullish as it may seem given most of it came from the west coast, which is separated from the rest of the country by the Rocky Mountains and therefore no clear indicator of a broader U.S. draw.
The threat of a transatlantic trade war eased after talks between U.S. President Donald Trump and European Commission President Jean-Claude Juncker.
By Shadia Nasralla, Additional reporting by Aaron Sheldrick