Oil prices fell by about two per cent on Tuesday as traders assessed the prospect of increased Russian diesel supplies and continued security threats to energy infrastructure and shipping routes in the Middle East.
Brent crude futures declined by $2.02, or 1.89 per cent, to $104.63 a barrel by 1049 GMT, while US West Texas Intermediate (WTI) crude futures dropped by $1.89, or 2.02 per cent, to $91.85 a barrel.
The decline followed gains of nearly $2 a barrel in the previous session, when Brent settled at its highest level since September 15.
US President Donald Trump said Russia had agreed to supply diesel to global markets, while his administration temporarily eased sanctions on Russian fuel intended to limit Moscow’s revenue for its war against Ukraine.
The potential increase in supplies could ease tightness in global fuel markets and reduce some of the supply concerns that have supported crude prices.
However, PVM Oil Associate Analyst Tamas Varga expressed doubt that Russia would meet its proposed supply target.
“Russia’s promise to supply 3-3.5 million tons per month by the end of the year is unlikely to be accomplished, given the dire state of the country’s refining sector,” Varga said.
The agreement has also attracted criticism from US lawmakers across party lines, who argued that Trump’s arrangement with Russian President Vladimir Putin appeared to conflict with US legislation restricting Russian energy imports until Moscow ends its aggression against Ukraine.
Meanwhile, security concerns persisted following attacks on Saudi Arabia’s energy-related infrastructure and reports of tanker attacks near the Strait of Hormuz.
Iran-aligned Houthi rebels reportedly struck Riyadh’s international airport over the weekend, heightening concerns about the vulnerability of Gulf infrastructure and maritime routes.
Varga said the absence of progress towards de-escalation in Eastern Europe and the Middle East continued to sustain a risk premium in oil prices.
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He added that attacks on commercial tankers and tensions between the Houthis and Saudi Arabia were likely to prevent regional exports from approaching September’s levels.
Ministers from OPEC and non-OPEC countries participating in the Declaration of Cooperation said shipping and insurance costs had risen to unprecedented levels, exceeding one-third of the value of the commodities transported and hindering the movement of crude oil and petroleum products.
OPEC Secretary-General Haitham Al Ghais said on Monday that the organisation had lowered its forecast for global oil demand growth this year to 400,000 barrels per day, from 1.4 million barrels per day projected at the beginning of the year.
Commerzbank analyst Carsten Fritsch said uncertainty also surrounded the possibility of renewed tensions between the United States and Iran after the US midterm elections in early November, or the prospect of an agreement between the two countries.
