A surprise inventory build and a stronger dollar overwhelmed a physical supply story that is getting more complicated, not less.
West Texas Intermediate fell 3.68% to $101.94 a barrel in trade around 3:45 p.m. Eastern Wednesday, down from Tuesday's $105.83 settlement and off a session high of $105.63. Brent fell 3.14% to $105.34 from $108.75.
That happened on a day when Saudi Arabia suspended oil loadings at its Yanbu terminal on the Red Sea, extending the disruption tied to the East-West pipeline outage first reported in the second week of September.
The reported workaround is the part to watch
Saudi Arabia is said to be routing additional crude through the Strait of Hormuz, and separately to have offered supplemental barrels to buyers via Oman. Neither arrangement has been independently confirmed, and the kingdom has not detailed a reopening timeline.
If the Hormuz redirection holds up, it is a meaningful and somewhat ironic development. The East-West pipeline exists precisely so Saudi crude can reach the Red Sea without transiting Hormuz. Pushing more volume back through that strait does not reduce supply risk. It relocates it to the single most concentrated maritime chokepoint in the oil market. A supply story that looks resolved in aggregate volume terms can be getting worse in risk terms at the same time.
Inventories and the dollar pointed the other way
The week's inventory estimate from the American Petroleum Institute, for the week ended September 11, showed a crude build of 7.14 million barrels against a consensus expectation of a draw of roughly 1.8 million barrels, a swing of close to nine million barrels versus forecast. The same estimate showed a gasoline build of 1.46 million barrels, a distillate build of 1.61 million barrels and a draw of 246,000 barrels at Cushing.
Wednesday added a second headwind. The dollar index rose 0.35% to 99.968 and touched 100.06 after the Federal Reserve raised rates and its own projections implied more increases to come. A stronger dollar mechanically pressures dollar-denominated commodities, and crude's decline steepened through the afternoon alongside it.
Energy is now inside the inflation debate
Deutsche Bank chief U.S. economist Matt Luzzetti argued ahead of the decision that "forward-looking indicators, including from energy prices, suggest the inflation overshoot is likely to persist for some time," with crude having climbed back over $100 a barrel amid renewed Middle East tensions.
The Fed's own statement went the other way on the question. The September text deleted July's reference to supply shocks driving price increases "in certain sectors, including energy," removing the clause that had functioned as a reason to look through energy-driven inflation.
What resolves the supply picture
A statement from Saudi Aramco or the Saudi Energy Ministry giving an actual reopening date. Independent confirmation of whether volumes are being redirected through Hormuz and in what quantity. And the official weekly U.S. inventory print, which will show whether the API's outsized build estimate is confirmed by government data or is an outlier. U.S. Energy Secretary Chris Wright has characterized the pipeline disruption as a brief interruption measured in days; independent analyst estimates run from several weeks to several months, and the two positions have not been reconciled.