U.S. inventory data also added further pressure on prices. Crude stocks dropped by only 640,000 barrels last week compared with expectations for the decline of 1.62 million barrels. The smaller draw suggests that the domestic supply is not tightening as quickly as expected. It also encouraged profit taking after the oil price reached near the $110 level earlier this week.

In my view, the alternative export route for Saudi Arabia may limit gains in oil prices in the short term. But fresh attacks or prolonged disruption at Yanbu could quickly push oil prices higher again.