Saudi Aramco has reorganized its crude export routes at a pace that has outpaced market expectations, swiftly eroding the supply-disruption premium that had built up following the recent pipeline attack. International crude futures came under pressure and accelerated their decline on Monday, with Brent briefly falling below the $100-per-barrel threshold during US trading hours.
According to data from TankerTrackers.com, Saudi Aramco loaded approximately 14 million barrels of crude onto seven Very Large Crude Carriers (VLCCs) in the Middle East Gulf on Sunday. Media reports noted that satellite imagery showed these tankers anchored near the Ras Tanura port area. This loading volume sends a strong signal that Saudi exports are partially recovering, directly dampening bullish sentiment in the oil market and prompting traders to begin pricing in a swift restoration of Saudi export flows.
On Monday, September 21 (US Eastern Time), Brent crude futures settled down $3.53, or 3.4%, at $100.34 per barrel, having briefly dipped below the $100 mark intraday for the first time since September 9. US WTI crude for October delivery settled down 4.51% at $95.78 per barrel, with both benchmarks hitting their lowest closing levels since September 8. WTI touched $94.22 during the session, with its intraday decline widening to more than 6%.
By Monday's close, both Brent and WTI had fallen for four consecutive sessions, marking their longest losing streaks since June 16 and June 24, respectively. Over that four-day period, Brent accumulated a decline of 7.73% while WTI fell 9.5%.
At the same time, growing expectations of diplomatic progress between the United States and Iran further compressed geopolitical risk premiums. President Trump expressed willingness to meet with Iranian President Masoud Pezeshkian, who is scheduled to attend the United Nations General Assembly this week. Tamas Varga, an analyst at PVM Oil Associates, noted that investors are pinning their hopes on a breakthrough in negotiations this week.
Loading volume exceeds expectations and export routes are rapidly reorganized
The drone attack on September 13 forced Saudi Arabia to shut down its east-west pipeline, halting crude loading operations entirely at the Yanbu oil port on the Red Sea coast. However, Saudi Aramco completed a large-scale switch of export routes in less than a week, at a speed that caught some market participants off guard.
According to Reuters, citing Vortexa data, Saudi crude loadings via the Gulf direction have averaged approximately 3.7 million barrels per day since September 12, up from 2.9 million barrels per day earlier this month. Between September 1 and 11, Saudi loadings via the Red Sea direction averaged about 3.9 million barrels per day.
Analysts at JPMorgan noted in a report last Friday that satellite data showed Saudi crude flows through the Strait of Hormuz had risen to 2.9 million barrels per day over the past six days, compared with just 700,000 barrels per day in August.
The scale of approximately 14 million barrels loaded in a single day on Sunday further confirms Saudi Arabia's ability to rapidly shift its export focus toward Gulf ports, and also suggests that the duration of this supply disruption may be shorter than the market's most pessimistic expectations.
Oil price retreat driven by fading geopolitical premium and diplomatic expectations
Brent crude's intraday break below $100 reflects the convergence of two forces: first, improved supply expectations stemming from the partial restoration of Saudi exports, and second, the unwinding of geopolitical premiums triggered by the reopening of a diplomatic window between Washington and Tehran.
Bob Yawger, director of energy futures at Mizuho, said that just a few days ago, the possibility of a US-Iran meeting seemed extremely remote, adding that this is a step in the right direction. According to Al Jazeera, Iran has communicated its conditions for resuming negotiations through mediators, a development confirmed by Iranian security chief Mohsen Rezaei.
Notably, actual conflict in the Middle East has not ceased. Yemen's Houthi forces have claimed responsibility for attacks on Saudi Aramco facilities in Riyadh and the Red Sea city of Yanbu, and have continued to advance military operations along the Red Sea coastal region.
A report from last Thursday (September 17) cited Iranian sources as saying that after Saudi Arabia sought assistance, a major power had asked Iran to help restrain the Houthi forces. Geopolitical uncertainty remains, but the market's current pricing focus has shifted from risk premiums to supply recovery expectations.
Sales strategy shifts eastward, benefiting Asian refiners while tightening European supply
Following the pipeline disruption, Saudi Aramco made notable adjustments to its sales strategy: canceling some crude cargo sales to European customers while increasing sales loaded from eastern ports via the Strait of Hormuz, targeting the Asian market.
According to media reports last week, citing trade sources, Saudi Arabia will sell approximately 60 million barrels of crude from Ras Tanura port this month and next, with deliveries completed through ship-to-ship transfers at Oman's Sohar port. This arrangement means Asian refiners will receive more ample Saudi crude supply, while European buyers face a period of tightened supply and must turn to alternative sources to fill the gap or bear spot premium pressure.
For Asian refiners, the arrival of incremental Saudi supply coincides with falling oil prices, easing procurement cost pressures. However, the ship-to-ship transfer delivery method also implies more complex logistics and some uncertainty regarding arrival times at ports.
Subsequent risks: pipeline repair progress and export sustainability remain uncertain
Although current export data indicates Saudi supply is recovering, the market still needs to stay alert to downside risks. No clear timeline has been disclosed for the repair of the east-west pipeline, and a Saudi Aramco spokesperson declined to comment on the matter. If pipeline repair progress falls short of expectations, or if Houthi forces launch a new round of attacks on Gulf export facilities, the current export route relying on the Strait of Hormuz will face greater pressure.
Additionally, Libya has also signaled potential supply disruptions. Massoud Suleman, chairman of Libya's National Oil Corporation, told Reuters on Monday that production at the country's Sharara oilfield had partially declined, though he did not specify a reason, adding an extra variable to the global supply picture.
The current pullback in oil prices has, to some extent, already reflected the market's optimism regarding Saudi export recovery. If actual export data fails to sustain the trend, or if geopolitical tensions reignite, prices could move higher once again. The actual progress of pipeline repairs and the sustainability of Strait of Hormuz exports will be the key observation windows for market pricing going forward.
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