Oil prices fell on Tuesday as traders priced in more Russian fuel reaching global markets and a pause in attacks on energy infrastructure, even though Moscow has yet to confirm the ceasefire described by US President Donald Trump.
Brent crude dropped about 1.1% to $105.47 a barrel, while West Texas Intermediate fell roughly 1.3% to $92.57.
The move was not the first decline this week, but is still significant after Gulf tensions had pushed crude higher.
Yet the physical evidence for lasting relief remains thin, as Russian strikes on Ukrainian energy targets have continued, while shipping risks around the Strait of Hormuz remain elevated.
Russian diesel offers relief, but the volumes are small
The clearest bearish catalyst is the prospect of renewed Russian diesel exports after Washington temporarily eased restrictions on some fuel transactions.
Trump has said Russia will release additional diesel into global markets, starting with about 300,000 tonnes.
Eurasia Group analysts led by Alexander Kolyandr told MarketWatch that the first tranche amounts to only about half a day of US distillate consumption and could otherwise have been redirected to markets such as Turkey, Brazil or West Africa.
UBS commodity strategist Giovanni Staunovo told The National that the proposed October volume equates to roughly 100,000 barrels a day, replacing only a fraction of the decline in Russian seaborne diesel exports since the start of the year.
Moscow still has not validated the ceasefire trade
The bigger assumption is political rather than physical. Trump said Russia and Ukraine had agreed to stop attacking energy infrastructure, but the Kremlin has only confirmed that discussions are continuing.
Ukrainian officials have reported fresh Russian strikes on power and gas facilities after the announcement.
An actual truce could reduce Ukrainian attacks on Russian refineries, stabilise fuel output and make exports more reliable. Without it, one of Tuesday’s main bearish assumptions becomes much less durable.
Eurasia Group told MarketWatch that the proposed ceasefire was unlikely to have much immediate effect given continued attacks.
Hormuz still carries the larger supply risk
ANZ Research said attacks on tankers near the Strait of Hormuz were disrupting Persian Gulf flows and could limit further downside in crude. Roughly one-fifth of global oil transport passes through the waterway.
OPEC said this week that disruption to maritime routes has pushed shipping and insurance costs to unprecedented levels, exceeding one-third of the commodity value in some cases.
Those costs are feeding directly into the oil supply chain.
Tuesday’s decline therefore rests on a fragile trade-off. A modest return of Russian diesel can ease a tight products market, and a genuine ceasefire would improve the outlook further.
But neither development yet outweighs the risk of further Gulf attacks or another failure of Russia-Ukraine diplomacy.
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