Oil prices fell Wednesday, reversing earlier gains that pushed Brent crude above $110 a barrel, as traders weighed a recovery in Middle East oil exports against persistent threats to shipping through the Strait of Hormuz and attacks targeting Saudi Arabia.
December Brent crude futures dropped 0.3% to $108.42 a barrel, while December West Texas Intermediate futures slipped 0.1% to $97.69 a barrel.
Both benchmarks traded higher earlier Wednesday before reversing course. Brent climbed above $110 a barrel during the session, after briefly topping $111 Tuesday, its highest level since May.
Shipping risks remained elevated as Iran's Islamic Revolutionary Guard Corps said Tuesday that two oil tankers caught fire after striking mines south of the Strait of Hormuz.
Regional tensions also persisted. The Saudi-led coalition said Wednesday that it intercepted drones launched toward the kingdom, including one targeting the Eastern Province, a major oil-producing region.
Diplomatic efforts to end the conflict are continuing. Qatar's Foreign Ministry said Tuesday that contacts, visits and exchanges of messages between Washington and Tehran remained ongoing, amid efforts to reopen the Strait of Hormuz and end the regional escalation.
Despite the continuing attacks, Middle East oil shipments have surpassed prewar levels. Flows through the Strait of Hormuz and alternative export routes averaged more than 24 million barrels a day in the week through Oct. 18, above the prewar level of 23.3 million barrels a day, according to Kpler.
Alternative export routes have played a growing role in the recovery. Around 40% of Gulf oil shipments now bypass the Strait of Hormuz, up from 17% before the war, as Saudi Arabia and the United Arab Emirates make greater use of pipelines and other shipping routes, The Wall Street Journal reported.
However, refined-product exports have recovered more slowly than crude shipments. The International Energy Agency said Middle East refined-product exports remained below prewar levels, reaching 1.9 million barrels a day in September against 4.7 million before the conflict. The agency expects tight diesel supplies to persist well into 2027.
Tightness in refined-product markets is also reflected in elevated diesel refining margins. The Singapore gasoil crack spread, a measure of diesel's premium over crude, stood at $66.91 a barrel Tuesday, compared with an average of $18.16 in 2025, according to S&P Global Platts.
On the demand side, China's apparent oil demand fell 15.2% from a year earlier to 12.75 million barrels a day in September, according to estimates from analysts at ING. The bank also estimated that China's crude inventories declined by around 16 million barrels during the month, based on production and trade data.
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