The price of Brent crude oil futures fell by $1.30, equivalent to a 1.2% decrease, reaching $105.35 per barrel. Additionally, the price of West Texas Intermediate (WTI) crude oil in the U.S. also decreased by $1.25, equivalent to a 1.3% drop, reaching $92.49 per barrel.
In the previous trading session, both oil benchmarks had increased by nearly $2 per barrel, with Brent oil reaching its highest level since September 15. The recent price drop follows the announcement by Donald Trump, the President of the United States, regarding Russia's agreement to supply diesel for global markets. His administration has temporarily lifted U.S. sanctions on Russian fuel.
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Impact of Increased Supply on the Global Market
Increased diesel supply could help alleviate shortages in global fuel markets and somewhat reduce the supply concerns that have recently supported crude oil prices. However, analysts at ING noted in a report that there are significant doubts about the energy ceasefire between Russia and Ukraine, especially given reports that Russia has targeted Ukrainian energy facilities since Trump announced this news.
Lawmakers from both parties in the U.S. criticized Trump's agreement with Putin, stating that it apparently violates U.S. law, which bans imports of Russian energy until the war between Russia and Ukraine ceases. These concerns were particularly focused on the vulnerability of energy infrastructure and shipping routes in the Gulf, which intensified after Yemeni armed forces attacked Riyadh International Airport and reports emerged of attacks on tankers near the Strait of Hormuz.
Analysis and Forecasts
These incidents threaten the improvement in Middle Eastern oil supply observed in September and have raised fears of further disruptions in one of the world's most important energy transit routes. Tim Waterer, a senior analyst at KCM Trade, stated, "The fresh supply of diesel from Russia and a more stable flow of Saudi oil have somewhat eased the market, but it remains more concerned about the risk of further attacks on ships or pipelines in the Gulf than it is encouraged by the extra barrels." He added, "As long as we do not see clearer signs of reduced tensions, the price trajectory will remain upward inclined."
Cedric Chehab, a senior economist at BMI, also predicted that Brent oil prices would remain above $100 for months. He stated in a program on CNBC that reaching an agreement between the U.S. and Iran may still take several months. Chehab remarked, "For this reason, we believe that oil prices will remain at a high level — above $100 per barrel of crude oil — and this situation will continue to exert pressure on global inflation, inflation expectations, and monetary policies."
The Trump administration is trying to curb inflation before the midterm elections in Congress in November. Trump also announced an agreement for the immediate release of 300,000 tons of diesel by Russia for U.S. and global markets, which is set to continue with the supply of another 500,000 tons in November and one million tons thereafter.
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