DTN Oil Update
Oil Rises on Mideast Risks Despite Russia-US Diesel Deal
HOUSTON (DTN) -- Oil crude futures climbed nearly 2% on Monday in response to attacks on Saudi Arabian infrastructure over the weekend. Meanwhile, ULSD futures dropped on the day following news that Russia will supply additional diesel to international markets under an energy agreement with the U.S.
The latest escalation in Middle East conflict renewed the risk premium in oil futures, even as the Trump administration sought to mitigate fuel prices through an energy deal with Russia.
U.S. president Donald Trump announced Friday, Oct. 9, that his administration reached an agreement with Russian President Vladimir Putin to release immediately over 300,000 bbl to the U.S. and global markets. The announcement surprised market participants and drew opposition from multiple sectors as Russia and Ukraine have intensified attacks in recent weeks.
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Following a phone call with Putin, President Trump on Friday demanded that Ukraine cease attacks on Russian refineries. Kyiv has since refrained from attacking Russian energy infrastructure.
Trump also announced a one-time purchase of about 3.75 million bbl of sanctioned Russian diesel to ease pump prices ahead of next month's midterm elections. Market observers doubted the temporary sanctions waiver would significantly lower prices because the supply crunch is global and the volume equals only about one day of U.S. consumption or 17 hours of domestic production.
Separately, IEA Executive Director Fatih Birol asked member governments to consider additional diesel releases from emergency stockpiles as global diesel markets tighten, according to an IEA statement released Sunday, Oct. 11.
The G7 leaders said Oct. 2 they would carry out a coordinated release of 100 million bbl through the IEA over four months, including a frontloaded diesel release within the first 20 days, and would meet in the coming days to discuss possible additional diesel releases.
Meanwhile, Iran-allied Houthis attacked infrastructure of Saudi Arabia over the weekend aiming to retake control in areas near shipping chokepoints. The Houthis twice struck Riyadh international airport, raising concerns about the kingdom's capacity to defend its infrastructure from drones and missile attacks. Last month, drones launched from Iraq damaged pumping stations along the East-West pipeline, leading to a two-week suspension of Saudi crude oil exports from the Red Sea.
The front-month NYMEX WTI futures contract rose $1.73 to $93.58 bbl, while ICE Brent for December delivery was up $1.79 to $106.51 bbl.
In contrast, front-month ULSD futures bucked the trend, falling $0.0230 to $4.7154 gallon. NYMEX RBOB for November delivery edged down $0.0046 to $3.2906 gallon.
The U.S. Dollar Index strengthened by 0.358 points to 102.38 against a basket of foreign currencies.
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