Oil slips as traders weigh more Russian diesel against Saudi and Hormuz risks
Oil prices fell early Tuesday after a nearly $2 jump on Monday, as traders weighed the prospect of more Russian diesel against Houthi attacks on Saudi Arabia and tanker strikes near the Strait of Hormuz. Goldman Sachs says the extra Russian diesel is unlikely to lower fuel prices much.
What moved: Brent crude, the global benchmark, fell 1.49% to $105.06 a barrel and U.S. benchmark West Texas Intermediate (WTI) fell 1.86% to $92, CNBC reported early Tuesday. OilPrice.com had Brent at $105.43 and WTI at $92.60 at its time of writing. Brent settled at $106.65 on Monday, its highest level since September 15, after gaining nearly $2 a barrel in that session, The Economic Times reported. Prices moved through the morning, so figures vary by source and time.
The bigger picture: Oil is up more than 70% this year as the U.S. war on Iran has rattled energy markets, The Economic Times reported.
Russian diesel: President Donald Trump on Monday defended his administration’s decision to temporarily ease restrictions on Russian diesel, CNBC reported. The agreement would let Russia supply diesel to U.S. and global markets for six months. Lawmakers from both parties have said the deal appears to violate U.S. law barring Russian energy imports until Moscow ends its war in Ukraine, according to The Economic Times.
Will it lower prices? Probably not by much, Goldman Sachs said in a note Monday, according to CNBC. The bank estimated that an extra 800,000 metric tons of diesel — roughly 6 million barrels — would cut wholesale diesel prices on the U.S. Gulf Coast and in Europe by just $1 to $2 a barrel. Goldman said Russian refinery outages are up 3 million barrels a day from a year earlier, limiting how much more Moscow can produce. It also said U.S. diesel inventories are down 14% from a year earlier.
Middle East risk: Iran-backed Houthi militants struck King Khalid International Airport in Riyadh on Saturday, killing 12 people, CNBC and The National reported. The National said the airport was struck four times in five days. Tanker attacks near the Strait of Hormuz and Oman have added to supply worries, according to The Economic Times and The National.
Saudi reassurance: Saudi Energy Minister Prince Abdulaziz bin Salman said Monday at the WPC Energy Congress in Riyadh that the kingdom would keep oil flowing. “The word ‘fear’ in the Saudi dictionary does not exist,” he said, according to The National. He pointed to the East-West pipeline, which lets Saudi crude bypass the Strait of Hormuz; The National reported that its flow recovered to about 5.8 million barrels a day by October 6 after Houthi attacks in September.
What analysts are watching: Goldman Sachs has outlined a scenario in which oil could climb to $120 a barrel if attacks on Middle East shipping escalate, and fall back toward $80 if exports return to normal, The Economic Times reported. These are scenarios, not forecasts.
Why it matters: Diesel moves freight, farm equipment and delivery trucks, so its price feeds into what consumers pay for goods. Analysts’ view that the Russian volumes are small suggests relief at the pump, if any, may be limited.
Sources
- CNBC — Oil prices fall as traders assess Russian diesel supply prospects and Saudi-Houthi conflict
- The Economic Times — Crude oil falls to $105 as traders assess Russian supply, Mideast attacks
- OilPrice.com — Oil Prices Retreat as Saudi Arabia Pledges to Keep Exports Flowing
- The National — Saudi Arabia says oil supply to continue to flow despite Riyadh attacks