Oil fell as Chinese diplomatic intervention eased Saudi supply fears

Global crude futures fell on Friday, extending a three-day decline after China intervened to curb Houthi strikes on Saudi energy assets, though physical delivery cuts and record fuel prices kept benchmarks above $100.

International benchmark Brent crude fell 95 cents, or 0.93%, to settle at $104.87 a barrel. US West Texas Intermediate (WTI) dropped $1.61, or 1.58%, to close at $100.30 a barrel.

The downturn marked a third straight session of losses, though both contracts held near four-month highs amid stubborn structural deficits.

Selling pressure emerged after Beijing, acting on a request from Riyadh, asked Tehran to halt Houthi attacks against Saudi oil infrastructure. Sentiment was further calmed by diplomatic expectations ahead of this week’s UN General Assembly, where an Iranian delegation is slated to discuss the regional conflict.

However, losses were cushioned by mounting physical disruptions. Confirmed strike damage to three pumping stations on Saudi Arabia’s East-West Pipeline prompted Saudi Aramco to cancel October crude deliveries to European refiners. Meanwhile, Strait of Hormuz passages remained severely throttled, with daily commodity transits slipping to four on Thursday against a 10-day baseline of 16.

Downside was further limited by an acute refining crunch. US retail diesel hit a record $6.45 per gallon alongside unseasonal gasoline strength at $4.47 per gallon, compounded by an impending 371,000-bpd drop in US refining capacity. The middle distillate deficit continues to distort refinery yields, maintaining heavy feedstock cost-push pressure across downstream petrochemical cracking units.

Written by: Aiman Haikal