Oil prices fell for a second straight session amid expectations that Saudi Arabia could soon restore some oil flows through its damaged East-West pipeline while shipping crude through the Strait of Hormuz, easing immediate concerns over Middle Eastern supplies.

Brent crude futures settled down 1%, at $104.82 a barrel, and West Texas Intermediate slipped 0.5%, to $101.91 a barrel, adding to Wednesday's losses. The benchmarks ended well above their intraday lows.

"There's a lot of crosscurrents here," said David Russell, global head of market strategy at TradeStation.

Although there is clearly a supply shortage, "we're back to a spot where a clear bullish position on something like crude is no longer something has a favorable risk-reward," Russell said.

"At this moment in time, the next $10 could be just as easily up or down," he added.

The Federal Reserve raised its benchmark federal-funds rate range by a quarter of a percentage point to between 3.75% and 4% on Wednesday in an unanimous decision, beginning to take back cuts it made last year as policymakers seek to contain inflation. Most Fed officials projected at least one more rate increase this year.

Higher interest rates can weigh on economic activity and, in turn, oil demand.

The softer oil prices also reflect growing optimism that the disruption to Middle Eastern crude exports can be contained, according to Samer Hasn at XS.com. Saudi Arabia is shifting crude loadings away from its out-of-service Yanbu port, while barrels continue to flow through the Strait of Hormuz under U.S. protection and some Saudi flows have resumed, he said.

Still, the security situation around Saudi Arabia remains volatile. The Iran-backed Houthis said Wednesday that they shot down a Saudi F-15 fighter jet over Marib, an oil-and-gas-producing region in Yemen.

Saudi Arabia hasn't officially confirmed the loss, but two people familiar with the incident said a Saudi aircraft had been downed, The Wall Street Journal reported.

The Houthis have also seized territory in recent weeks, including an island in the Bab al-Mandeb Strait, strengthening their ability to interfere with Saudi Red Sea oil shipments.

Shipping through the Strait of Hormuz remains sharply below prewar levels, according to an International Energy Agency monitor updated Wednesday.

An average of 47 ships a week transited the strait between Feb. 28 and Sept. 13, down from 456 between Jan. 1 and Feb. 27, while weekly cargo capacity fell to 1.4 million metric tons from 16.9 million tons. The IEA cautioned that GPS jamming and vessels switching off their transponders mean the data likely understates actual traffic.

J.P. Morgan said Saudi Arabia could absorb much of a brief East-West Pipeline disruption through alternative export routes and crude inventories held outside the Gulf. Some Saudi barrels are still moving through the Strait of Hormuz, while the kingdom could also use ship-to-ship transfers and strategic crude stocks held in Asia and Europe to meet customer demand during repairs, the bank said.

Even with those alternatives, the disruption could continue to weigh on supplies to Europe. Saudi crude shipped from the Red Sea can reach the continent through the Suez Canal, while barrels redirected through the Strait of Hormuz face a substantially longer journey, StoneX energy analyst Alex Hodes said.

The bigger question for the oil market is how much consumption will ultimately have to adjust if Middle Eastern supplies remain constrained. Global oil demand has been surprisingly resilient relative to the scale of the supply shock, analysts at Capital Economics said, with inventory drawdowns allowing consumption to fall by much less than supply during the early stages of the crisis.

Crude exports through the Strait of Hormuz have risen to around 8 million barrels a day, or 57% of prewar volumes, but that increase could be outweighed by disruption to exports from Yanbu following the attacks and closure of the East-West Pipeline, Capital Economics said. With demand remaining resilient, oil prices might need to stay elevated for longer to bring consumption back in line with constrained supply.

China's buying could make that adjustment more difficult. Chinese crude imports rose to 9 million barrels a day in August from 7.2 million in June, while ship-tracking data for the first half of September point to a further gradual increase. If Chinese import demand continues to recover, more of the burden of adjusting global consumption would fall on the rest of the world, Capital Economics said.