Crude edges lower as G7 reserve release and Gulf flows offset Houthi strikes

Early trading suggests supply-side factors are currently outweighing geopolitical tensions. Emergency barrels from the Group of Seven and a rebound in Gulf exports are preventing price rallies, even as regional infrastructure comes under repeated attack. Saudi Aramco's unexpected price reduction for Asian buyers signals a bearish trend in physical markets: it indicates Saudi Arabia is focusing on maintaining export volumes as flows resume, which may put pressure on other Middle Eastern grades and reduce Brent's premium. Downside appears limited as long as Brent remains around $100. Any verified damage to Saudi installations, an escalation in Yemen, or new disruptions in the Strait of Hormuz could rapidly restore the risk premium. Ukraine's vow to step up refinery strikes adds a separate upside risk for refined products, particularly diesel.

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Earlier items:

• OPEC+ left November output unchanged over the weekend, with core members still 5 million bpd below prewar levels

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Oil is trapped between increased supply and rising military threats, but in the early hours of the week, the supply side is coming out ahead.

Key points:

• Brent edged down roughly 0.3% to about $102, while WTI dropped roughly 0.7% to around $90.50 in early Monday trading.
• On Friday, the G7 nations decided to release 100 million barrels of crude and diesel from strategic stocks, following pressure from President Trump.
• Middle East crude shipments surpassed pre-war averages on four out of seven days in the final week of September, even as tankers came under attack in the Strait of Hormuz.
• Yemen's Houthis said they launched missile and drone strikes on Aramco facilities in Riyadh and Khurais, though Saudi Arabia has not verified the claims. Additionally, Aramco reduced its November prices for Asia to the lowest in six years.
• OPEC+ has postponed its capacity review for 2027, while Ukraine intends to intensify strikes on Russian refineries.

According to Reuters, crude prices moved lower in early Asian trading on Monday. An increase in Middle East crude shipments and a joint release of emergency reserves by the Group of Seven boosted supply, offsetting recent assaults on Gulf energy facilities.

Brent crude futures were down about 0.3% at roughly $102 a barrel in early Monday trading, while US West Texas Intermediate crude fell about 0.7% to around $90.50.

This decline continues the trend from last week. Brent gave back most of its weekly advance and WTI finished around 1.5% lower, after the G7 decided on Friday to release 100 million barrels of crude and diesel from strategic reserves. The group also committed to refrain from energy export curbs, after pressure from US President Donald Trump.

Physical supply is also recovering. Shipping data indicates that Middle East crude exports surpassed pre-war levels on four out of seven days in the last week of September, even as attacks on tankers crossing the Strait of Hormuz persisted. An analyst commented that the reserve release is alleviating short-term supply concerns, and Saudi export volumes seem to be returning toward pre-war levels, though at greater expense and through less efficient pathways. The analyst noted that this combination is sufficient to cap prices for the moment, but the threat of additional harm to Gulf infrastructure remains.

The weekend underscored that risk. The Houthi group in Yemen reported launching ballistic missiles and drones at Aramco sites in Riyadh and the Khurais region, as payback for about 50 Saudi-led airstrikes in Yemen. Saudi officials have not verified the claims. Additionally, Yemen's internationally recognized government declared a large-scale military operation to reclaim all areas controlled by the Iran-supported group.

Saudi Aramco, in a surprise move, reduced its November crude prices for Asian customers to the lowest in six years. This action could indicate an effort to win back market share as Saudi shipments revive.

In other developments, OPEC+ has postponed a capacity assessment required to determine 2027 production targets, as the Iran war has cast uncertainty on output forecasts. Ukrainian President Volodymyr Zelenskiy stated that Kyiv will intensify strikes on Russian oil refineries.

At present, increasing supply is prevailing in the battle against geopolitical danger. However, with Gulf installations still coming under attack, the balance could change rapidly.