Oil Falls as Russian Diesel Deal Eases Supply Fears

MONTREAL (Oil Monster): Oil prices moved lower Monday as traders weighed the prospect of additional Russian diesel supply and a U.S.-announced energy ceasefire between Russia and Ukraine against continuing Middle East disruptions and tanker attacks.

Brent crude futures were trading at $104.61 per barrel by 0627 GMT, down 11 cents, or 0.11%, while U.S. West Texas Intermediate crude was at $91.36, down 49 cents, or 0.53%. Both benchmarks had fallen more than 1% earlier in the session.

The pullback followed U.S. President Donald Trump’s announcement that Russia would supply additional diesel to U.S. and global markets and his subsequent statement that Moscow and Kyiv had agreed to stop attacking each other’s energy infrastructure.

Russian Diesel Deal Pressures Oil and Fuel Prices

Trump said Friday that Russia would immediately supply more than 300,000 metric tons of diesel, equivalent to approximately 2.25 million barrels, to U.S. and international markets.

He said another 500,000 metric tons would follow in November, with a further 1 million tons to be supplied after that.

The additional volumes are intended to ease pressure in global diesel markets, where refinery disruptions and low inventories have pushed fuel prices sharply higher.

ICE gasoil futures fell about 3% to $1,436 per metric ton following the announcement.

The original early-market copy incorrectly described that quotation as being per barrel. ICE gasoil is traded and quoted in dollars per metric ton.

Trump Announces Russia-Ukraine Energy Ceasefire

Trump said Sunday that Russia and Ukraine had agreed to an immediate halt in attacks on each other’s energy infrastructure.

However, the status of the agreement remained uncertain Monday.

Ukrainian President Volodymyr Zelenskyy said the announcement had been unexpected and that Kyiv was still waiting for details. Ukraine indicated it was prepared to observe a reciprocal energy ceasefire if Russia did the same.

Moscow had not publicly confirmed the agreement at the time of reporting.

Ceasefire Should Not Yet Be Treated as Fully Confirmed

The distinction is important for oil markets because Ukrainian attacks on Russian refineries have reduced Russian fuel-production capacity and contributed to tight global diesel supply.

A sustained halt in attacks could allow more Russian refinery output to remain available to domestic and international markets.

But without confirmation from both governments and evidence that attacks have actually stopped, traders remain cautious about assuming that additional supply will persist.

Russian Refinery Attacks Have Tightened Diesel Supply

Ukraine has repeatedly targeted Russian refining and energy infrastructure during the conflict.

Damage to Russian refineries has reduced the amount of diesel and other petroleum products available to world markets at the same time that Middle East refining capacity has also been disrupted.

That combination helped turn what began primarily as a crude-oil supply crisis into a broader refined-products shortage.

IEA Calls for Faster Diesel Stock Releases

The International Energy Agency is also urging member countries to accelerate emergency petroleum releases already pledged earlier this year.

IEA Executive Director Fatih Birol said members should assess whether additional diesel releases are needed and urged countries that have not fully delivered previous commitments to speed up the remaining volumes, with diesel prioritized where possible.

ALSO READ: IEA Accelerates Emergency Oil Releases and Prioritizes Diesel

Middle East Conflict Keeps Brent Above $100

The Russia-related developments have reduced some immediate supply pressure, but they have not removed the larger geopolitical risk premium from oil markets.

Brent remains above $100 per barrel as fighting in the Middle East continues to threaten production, refining and commercial shipping.

Saudi Arabia has faced repeated Houthi attacks in recent days, including strikes targeting Riyadh’s international airport.

The United States has also said it is considering deeper involvement in Saudi military operations against the Houthis.

Hormuz Tanker Attacks Remain a Major Supply Risk

Commercial shipping through the Strait of Hormuz continues to face heightened security risks.

Over the weekend, UK Maritime Trade Operations reported that a tanker near Sohar anchorage in Oman was struck by a drone, while another vessel was damaged by an unidentified projectile while transiting the strait.

The attacks threaten to slow the recovery in Middle East crude exports seen during September.

ALSO READ: Hormuz Tanker Attacks Threaten Gulf Oil Export Recovery

Goldman Sachs Raises December Brent Forecast to $90

Goldman Sachs has also raised its December Brent crude forecast to $90 per barrel from $85.

The bank estimates that more than $20 per barrel of the current Brent price reflects geopolitical and supply-disruption risk.

Goldman’s base case assumes that continued adaptation of Middle East production and export routes will eventually reduce crude prices, while renewed escalation remains the principal upside risk.

The bank expects WTI to average about $81 per barrel in December 2026 and $73 in 2027.

ALSO READ: Goldman Sachs Raises December Brent Forecast to $90

Hurricane Isaias Production Starts Returning

Another supply constraint is beginning to ease in the U.S. Gulf of Mexico.

Shell, Chevron and BP have begun redeploying personnel and working to restore offshore production after Hurricane Isaias made landfall Saturday.

At the peak of storm preparations, more than 70% of Gulf oil production had been shut in.

Some production began returning Sunday as operators inspected facilities and restored offshore operations.

ALSO READ: Oil Rises as Gulf Storm and Middle East Attacks Threaten Supply

Why Oil Prices Remain Above $100

The market is currently balancing improving supply signals against persistent geopolitical risk.

Additional Russian diesel, a potential Russia-Ukraine energy ceasefire and recovering U.S. Gulf production all point toward greater supply availability.

Against that, tanker attacks, Houthi strikes, depleted global inventories and continuing Middle East refinery disruptions keep the market vulnerable to another sudden shock.

That tension explains why oil initially fell more than 1% Monday but later recovered much of the decline.

What Happens Next

The most immediate question is whether Russia and Ukraine actually implement a reciprocal halt on attacks against refineries, power infrastructure and other energy facilities.

Markets will also watch how quickly the promised Russian diesel reaches buyers, whether IEA members release additional diesel stocks and whether tanker security deteriorates further around Hormuz.

If Russian fuel exports increase while attacks on refineries decline, diesel-market pressure could ease. A renewed Middle East escalation, however, could quickly outweigh that relief.

Frequently Asked Questions

Why did oil prices fall on October 12?
Prices fell after Russia pledged additional diesel supplies and President Trump announced a Russia-Ukraine energy ceasefire, reducing some immediate concerns about global fuel availability.

Has the Russia-Ukraine energy ceasefire been confirmed?
Trump said both countries had agreed, but Russia had not publicly confirmed the agreement at the time of reporting. Ukraine said it supported a reciprocal halt but was waiting for details.

How much Russian diesel is expected to reach the market?
Trump said Russia would immediately supply more than 300,000 metric tons, followed by 500,000 tons in November and another 1 million tons afterward.

Why is Brent still above $100?
Middle East fighting, tanker attacks, depleted inventories and refinery outages continue to create substantial supply and transportation risks.

What is Goldman Sachs forecasting for Brent?
Goldman Sachs currently expects Brent to average about $90 per barrel in December 2026.

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Source: Reuters.

Courtesy: www.reuters.com