By Arathy Somasekhar
HOUSTON, Sept 17 (Reuters) - Oil prices eased about 2% on Thursday to a one-week low, after reports of additional Saudi crude cargoes through Oman eased supply concerns, though prices stayed above $100 a barrel on fears the Middle East conflict could widen.
Brent crude futures were down $2.67, or 2.5%, to $103.13 a barrel at 12:03 p.m. ET (1603 GMT), after touching their lowest level since September 10. US West Texas Intermediate futures were down $1.61, or 1.6%, at $100.82 a barrel,
their lowest since September 11. On Wednesday, both contracts fell about $3.
Crude retreated from weekly highs after US Energy Secretary Chris Wright signalled a quicker return to service for Saudi Arabia's East-West pipeline, while Saudi efforts to maintain shipments via additional loadings off Oman eased supply worries, said Tim Waterer, chief market analyst at KCM Trade.
Saudi Arabia is offering more crude cargoes to Asian refiners through ship-to-ship transfers off Oman's Sohar port, people familiar with the matter said. This will offset some of the disruption caused by attacks on the East-West pipeline to the Red Sea. Saudi Arabia is also seeking to return about half the capacity of its East-West oil pipeline within days after the link was halted last week following drone attacks, Bloomberg reported.
Oil prices had climbed to around four-month highs this week after shipping industry sources said crude loadings at Saudi Arabia's Red Sea export hub of Yanbu had been suspended and Riyadh had canceled some cargo deliveries to European customers. The East-West pipeline supplies Yanbu.
Traders said a prolonged closure of the pipeline could cut off as much as 4% of global oil supply. Saudi Arabia has not said when operations might resume, but Wright told CNBC on Tuesday that crude should be flowing through the pipeline within days.
"Oil prices extended the previous session's losses on Thursday as concerns over Middle East supply disruptions eased to some extent," said Christopher Tahir, Senior Market Strategist at trading platform Exness, citing increased crude flows through additional offshore loadings via Oman and efforts to restore the East-West pipeline.
"Nevertheless, the physical market remains tight, limiting the scope for further declines. Tanker traffic through the Strait of Hormuz continues to fall, while tensions between Saudi Arabia and the Houthis leave Red Sea shipping and regional energy infrastructure exposed to renewed disruption," Tahir added.
Three pumping stations serving the East-West pipeline were damaged in an attack last week, and the repair timeline remained unclear, according to assessments from three oil and security sources.
Singapore's DBS Bank said its base-case scenario for the fourth quarter assumes tensions between the US and Iran will ease, allowing Brent to stabilise in an $85 to $95 a barrel range.
DIESEL MARKET FEELS THE SQUEEZE
While crude supply disruptions remain the market's main concern, tightening diesel supplies have emerged as another source of pressure as disruptions to energy infrastructure in the Middle East and Russia constrain fuel availability.
European gasoil futures, a benchmark for diesel prices, settled at a record high on Tuesday. US ultra-low sulfur diesel futures also settled at a record high.
A Ukrainian drone attack damaged a refinery in the Russian city of Yaroslavl, causing a fire that was later extinguished, regional Governor Mikhail Yevrayev said on Thursday.
(Reporting by Anushree Mukherjee in Bengaluru,Yuka Obayashi in Tokyo and Trixie Yap in Singapore; Editing by Sonali Paul, Christian Schmollinger, Mark Potter, Nick Zieminski and David Gregorio)
