Oil retreats from weekly highs as Saudi Arabia eyes East-West pipeline restart

European gas rises as Germany pushes for storage buildup ahead of winter

Oil futures gave back gains from four-month highs on Wednesday as Saudi Arabia moved crude loading away from the out-of-service Yanbu port and signaled it could resume flows through the East-West pipeline. Front-month WTI settled down 3.2% at $102.43 a barrel and Brent fell 2.7% to $105.83 a barrel, after both benchmarks had climbed earlier in the week on concerns about extended risks to Middle East supply routes.

“We’re seeing the markets pricing in the higher risk associated with beliefs that the conflict could continue longer,” said Angie Gildea, global head of oil and gas at KPMG, noting that damage to the Saudi pipeline, drawdowns in U.S. Strategic Petroleum Reserve inventories, and increased Chinese buying were factoring into pricing. SPR withdrawals “can’t go on forever,” Gildea added, “so at some point we get into some real challenges.”

Earlier in the Asian session, oil had been lower, with WTI down 1.0% at $101.38 a barrel and Brent off 1.0% at $104.80 a barrel. Samer Hasn of XS.com attributed the softer prices to optimism about taming the deep disruption to Middle East crude-oil exports, citing reports of Saudi Arabia shifting loading away from Yanbu and continued flows through the Strait of Hormuz under U.S. protection. Hasn said the partial resumption of Saudi flows could push prices down and that prices might return to wide sideways trading if the U.S. signals potential negotiations with Iran.

By midday, however, the picture had shifted as diplomatic signals began offering some relief. WTI was down 1.9% at $100.46 a barrel and Brent fell 2.8% to $102.86 a barrel, according to Christopher Tahir of Exness. Tahir noted that Saudi Arabia was increasing shipments via Oman and could soon resume flows through the East-West pipeline, but cautioned that “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.”

In a separate note, J.P. Morgan analysts wrote that Middle East countries investing in oil pipelines to diversify export routes remains useful but not risk-free, following the attack on Saudi Arabia’s East-West pipeline. “Protecting hundreds of kilometers of energy infrastructure remains challenging, suggesting that durable regional de-escalation and security arrangements ultimately provide a more effective solution than additional infrastructure alone,” they wrote.

European gas markets moved in the opposite direction. The Dutch TTF contract rose 0.45% to 78.37 euros a megawatt-hour, even as oil prices fell on the prospect of lost Saudi supplies returning to the global market faster than expected. Lower-than-average storage levels, especially in Germany, continued to support gas prices heading into winter, with Germany now pushing its state-owned gas trader to buy more gas to grow inventories.

In equity markets, J.P. Morgan analysts Pavan Mahbubani and Mukund Verma wrote that the market underappreciates the cash flow potential of U.K. renewable power generator Drax, after the company hiked its outlook for 2026 on the back of its £561 million acquisition of Bluefield Solar Income Fund, completed July 31. The analysts expect the new solar and wind assets to cut costs and improve pricing. “We increase our EPS by 3% off the back of this, which we see as being driven by strong operational performance of power generation against a high, volatile power price backdrop,” they wrote. J.P. Morgan has an overweight rating with a 960-pence price target; shares were 0.85% higher at 826.50 pence.

At infrastructure investor Infratil’s investor day, analysts at Jarden pointed to upgraded FY 2027 earnings guidance for the company’s partially owned CDC data centers and argued the market may be undervaluing the near-term pipeline at U.S. renewable energy provider Longroad. The next catalyst, they said, will likely be the pricing of a US$750 million external capital raise at Longroad. Jarden kept a buy rating on Infratil’s New Zealand-listed stock with an unchanged NZ$18.63 target; shares closed 1.3% higher at NZ$14.28.

Jefferies analyst Roger Samuel called upgraded growth ambitions at Longroad the biggest surprise of the investor day, saying rising power-purchase agreement prices likely prompted Infratil to upgrade its target operating fleet at Longroad to 14.3 gigawatts from 11.5 GW. Samuel noted, however, that there were few details regarding Infratil’s contention that 5 GW of its 10 GW data center-related opportunity is immediately actionable. Jefferies kept a buy rating and raised its target on Infratil’s Australia-listed shares by 1.4% to A$15.00; shares were up 0.8% at A$11.41.

In Malaysia, Kenanga Investment Bank analyst Peter Kong and his team wrote that the country’s oil and gas-related exposure should continue to attract investors as Middle East disruptions are expected to persist through year-end. While higher interest rates, partly driven by higher energy prices, may weigh on technology and other rate-sensitive sectors, oil and gas-related stocks could benefit. Kong’s preferred stock is shipping company MISC.

TA Securities analyst Hafriz Hezry wrote that YTL Power International’s reservation of four additional Siemens Energy gas turbines gives it an advantage in bidding for new gas-fired projects, amid tight global supply and lead times exceeding five years. YTL Power and Ganda Power have now reserved seven SGT-9000HL units, supporting potential projects in Malaysia and the region with combined capacity of about 5.25GW. If fully deployed, Hezry estimated the capacity could add 450 million to 500 million ringgit to annual profit and about 6.7 billion ringgit to equity value, none of which is reflected in current valuation. TA Securities maintained its buy rating with a 6.53-ringgit target; shares were 5.3% higher at 5.80 ringgit.