TLDR
- Saudi Arabia is rerouting crude oil through Oman’s Sohar port after drone attacks damaged its Red Sea pipeline
- Brent crude fell to $108.16 and WTI dropped to $104.63 after a two-day rally
- U.S. crude inventories rose by 7.1 million barrels, far above the expected 1.6 million barrel draw
- European diesel prices hit a record high as Middle East supply disruptions squeeze fuel markets
- U.S. diesel prices surpassed $6 a gallon for the first time ever last week
Oil prices pulled back on Wednesday after Saudi Arabia found a new route to ship crude through Oman, easing some fears about Middle East supply disruptions. Brent crude fell to $108.16 a barrel while West Texas Intermediate dropped to $104.63.
The dip followed a two-day rally that had pushed both benchmarks up more than 6% in a week. That rally was driven by reports that Houthi drone attacks had damaged Saudi Arabia’s key east-west pipeline and forced the kingdom to suspend loadings at its Yanbu Red Sea port.
Saudi Arabia Finds Alternative Route
Saudi Arabia is now offering crude to Asian refiners through ship-to-ship transfers off Oman’s Sohar port. This workaround has reduced immediate fears that supply disruptions could be severe or long-lasting.
Oil prices declined on Wednesday after reports that Saudi Arabia was offering additional crude cargoes through Oman eased concerns over the extent of supply disruptions in the West Asia. European diesel prices, meanwhile, remained close to a record high.
Brent crude futures fell… pic.twitter.com/7TGCIxyEPb
— The Cradle (@TheCradleMedia) September 16, 2026
UBS analyst Giovanni Staunovo said the news that Saudi Arabia was exporting from the Gulf suggested concerns about a larger disruption were easing.
Vessel transits through the Strait of Hormuz dropped to just four on Tuesday, well below the 10-day average of 18. The strait handled about a fifth of global oil and gas supply before the U.S.-Israeli conflict with Iran began in late February.
Macquarie analysts said flows through the Strait of Hormuz had stayed resilient despite rising tensions, possibly reaching more than 7.5 million barrels per day since fighting resumed on August 30.
Citi expects near-term tensions to keep crude prices elevated, but sees the Strait of Hormuz reopening in the fourth quarter of 2026 with help from diplomatic efforts.
Diesel Prices Hit Record Highs
European diesel prices reached their highest level since April on Tuesday, with gasoil futures settling at a record high. Analysts say Europe has lost diesel and jet fuel supply from the Middle East, while tensions in Eastern Europe have disrupted Russian refineries.
The U.S. national average diesel price crossed $6 a gallon last week for the first time on record.
Market analyst Frank Walbaum described diesel’s strength as a product-specific shortage on top of expensive crude.
Adding to the supply picture, output at three Libyan oil fields has reportedly been suspended.
The oil price surge has also pushed the benchmark 10-year U.S. Treasury yield to its highest point in nearly two decades.
Markets are pricing in a 92% chance the Federal Reserve raises interest rates at its Wednesday meeting. A rate hike could help fight inflation but risks slowing hiring and economic growth.
The U.S. Strategic Petroleum Reserve has dropped by nearly 130 million barrels so far in 2026, sitting at 285.36 million barrels.
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