SINGAPORE, Oct 13: Oil prices edged lower on Tuesday after rising by nearly $2 a barrel in the previous session, as traders assessed the prospect of additional diesel supplies from Russia alongside continuing threats to energy shipments and infrastructure in the Gulf region.
Brent crude futures fell 61 cents, or 0.57 per cent, to $106.04 a barrel by 0000 GMT. US West Texas Intermediate crude futures declined 47 cents, or 0.5 per cent, to $93.27 a barrel.
Brent had settled at $106.65 a barrel on Monday, marking its highest closing level since September 15.
Market sentiment was influenced by US President Donald Trump’s announcement that Russia had agreed to supply diesel to global markets. His administration also temporarily eased US sanctions affecting Russian fuel supplies, a move intended to increase availability at a time of tightness in international energy markets.
The prospect of additional shipments could help ease pressure on fuel supplies and moderate some of the upward momentum in crude prices. However, uncertainty over security in the Middle East continued to limit the relief offered by the potential increase in Russian exports.
Trump’s reported arrangement with Russian President Vladimir Putin also drew criticism from lawmakers belonging to both major US political parties. They argued that the move appeared to conflict with legislation restricting imports of Russian energy until Moscow ends its military aggression against Ukraine.
Tim Waterer, chief analyst at KCM Trade, said additional Russian diesel and steadier Saudi supply flows were providing some relief to the market. However, he noted that concerns about further attacks on vessels and pipelines in the Gulf remained stronger than the reassurance offered by additional supplies.
He added that oil prices could continue facing upward pressure until clearer signs of a de-escalation emerge.
Gulf security concerns keep traders cautious
Developments across the Middle East remained a major factor influencing market expectations. An attack attributed by Saudi Arabia to Yemen’s Iran-aligned Houthi movement targeted Riyadh’s international airport over the weekend, while attacks on tankers were also reported near the Strait of Hormuz.
The incidents raised concerns about the security of energy infrastructure and commercial shipping routes in a region that plays a crucial role in global oil supplies.
The Strait of Hormuz is among the world’s most important oil transit corridors, linking major Gulf producers with international markets. Any prolonged disruption could delay shipments, increase freight expenses and tighten the availability of crude and refined petroleum products.
The latest security concerns also threaten to undermine the recovery in Middle Eastern supplies observed in September. Traders are therefore monitoring developments closely to determine whether the incidents will result in sustained interruptions to production, transport or exports.
Even when oil production remains unaffected, threats to vessels and maritime infrastructure can increase the cost of moving energy commodities. Shipping companies may face higher insurance premiums, while operators could reconsider routes or delay voyages in response to security risks.
Such additional costs can feed into the prices paid by refiners and other buyers, adding pressure to fuel markets already dealing with supply uncertainty.
Shipping costs add to pressure on energy trade
Ministers from OPEC and non-OPEC participating countries under the Declaration of Cooperation have highlighted the growing burden of transport and insurance expenses.
According to the ministers, shipping and insurance costs have surged to unprecedented levels, exceeding one-third of the value of the commodity in some cases. These expenses are making the movement of crude oil and petroleum products less efficient.
Higher logistics costs can affect both producers and consumers. Exporters may receive lower net returns when transportation becomes more expensive, while importers may face higher landed costs even if benchmark crude prices decline.
The situation also creates challenges for countries that depend heavily on imported energy. Refiners and distributors must manage changes in procurement costs, delivery schedules and inventories, while governments may face pressure to limit the impact on domestic fuel prices.
The availability of additional Russian diesel could ease some pressure in refined-product markets, but it may not fully offset the consequences of disruptions affecting crude shipments or other petroleum products.
Diesel and crude oil are closely connected but serve different roles in the energy supply chain. An increase in diesel availability can improve the supply of transport and industrial fuel without necessarily resolving shortages or delays involving crude oil itself.
OPEC lowers oil demand growth outlook
The Organisation of the Petroleum Exporting Countries has also revised its assessment of global oil demand.
OPEC Secretary General Haitham Al Ghais said on Monday that the organisation had reduced its forecast for oil demand growth this year to 400,000 barrels per day, compared with an estimate of 1.4 million barrels per day at the beginning of the year.
The revision reflects developments in the global economy and oil market over the course of the year.
Slower demand growth can reduce the upward pressure on prices by limiting the amount of additional crude required by refiners and consumers. However, its effect depends on the balance between consumption, production, inventories and disruptions to supply.
A weaker demand outlook may therefore act as a counterweight to geopolitical risks, although it does not eliminate the possibility of sharp price movements if major export routes become less accessible.
For oil-producing countries, the outlook presents a challenge in balancing output decisions against changing consumption patterns and market uncertainty. For importing economies, slower demand growth could offer some relief if it translates into more readily available supplies and lower prices.
Market outlook remains uncertain
Tuesday’s modest decline suggests that traders are balancing two competing forces: the possibility of improved fuel availability through Russian exports and the threat of further disruptions in the Gulf.
Additional supplies could reduce pressure on diesel markets and help ease concerns about tight fuel availability. Yet the impact will depend on the volume of shipments, the timing of deliveries and the extent to which sanctions-related restrictions affect transactions.
Meanwhile, the security situation remains a key source of uncertainty. Further attacks on vessels, pipelines or other energy facilities could push prices higher by increasing the perceived risk of interruptions to global supply.
Investors will also be watching Saudi export flows, shipping conditions around the Strait of Hormuz and developments in international diplomatic efforts.
The oil market’s direction will ultimately depend on whether additional supplies are sufficient to offset the risks facing existing production and transport networks. Until the security outlook becomes clearer, fluctuations in crude prices and refined-fuel costs are likely to remain sensitive to developments across the Gulf.