Oil Market Retreats / Russian Fuel Supply to Push Prices Lower?
Oil prices fell in Tuesday trading as concerns over supply eased and the prospect of higher Russian fuel exports to global markets weighed on the market.
Oil prices fell on Tuesday following the reduction of supply risks caused by attacks on Saudi Arabia and the possibility of an increase in Russian diesel supply to global markets.
The price of Brent oil futures decreased by 1 dollar and 62 cents, equivalent to 1.52%, to 105 dollars and 3 cents per barrel. US West Texas Intermediate crude oil also decreased by 1 dollar and 66 cents, equivalent to 1.77%, to 92 dollars and 8 cents per barrel.
Both oil benchmarks were up nearly $2 a barrel in Monday's trading, with Brent crude finishing at its highest level since September 15.
The possibility of increasing Russian fuel supply to world markets
US President Donald Trump announced that Russia has agreed to supply diesel to world markets. The US government also temporarily suspended sanctions on Russian fuel, which were imposed with the aim of depriving Moscow of the revenues from the war in Ukraine.
The increase in supply could help ease constraints in the global fuel market and ease some of the supply concerns that have supported oil prices recently.
However, Tamas Varga, a senior analyst at PVM Oil Institute, said that due to the unfavorable state of the Russian oil refining industry, it is unlikely that the country's promise to supply 3-3.5 million tons of fuel per month by the end of the year will be fulfilled.
Lawmakers of both parties in the United States also criticized Trump's agreement with Vladimir Putin, saying that the agreement appears to be in violation of the U.S. law banning energy imports from Russia until Moscow's attacks on Ukraine end.
Continuation of concerns about energy security in the Persian Gulf
The vulnerability of energy infrastructure and shipping routes in the Persian Gulf continues to be of concern to traders. These concerns have intensified after Ansarullah, aligned with Iran, attacked Riyadh International Airport last weekend and published reports about attacks on oil tankers near the Strait of Hormuz.
Pointing to the lack of progress in the process of reducing tensions in Eastern Europe and the Middle East, Varga said that risk appetite due to geopolitical developments is still at a high level.
He added that the increase in attacks on commercial oil tankers and the escalation of tension between Ansarullah and Saudi Arabia have caused oil exports from this region to not reach the high levels recorded in September.
The ministers of OPEC member countries and non-participating countries also announced in the cooperation statement that sea transportation and insurance costs have reached unprecedented levels and exceeded one third of the value of the cargo. An issue that disrupts the efficient transportation of crude oil and petroleum products.
Reduction of OPEC forecast of global oil demand growth
Haitham al-Ghais, the Secretary General of OPEC, announced on Monday that the organization has reduced its forecast for the growth of global oil demand this year from 1.4 million barrels per day at the beginning of the year to 400 thousand barrels per day. According to him, this review has been done according to the developments and conditions formed throughout the year.