Crude oil futures fall after nearly $2 gain in previous session

Crude oil futures experienced a decline on Tuesday morning, following an increase of nearly $2 per barrel in the previous trading session. Market participants assessed the impact of Russian diesel exports amidst escalating tensions in West Asia. At 9:30 am on Tuesday, December Brent oil futures were trading at $105.42, representing a 1.15% decrease, while November crude oil futures on WTI (West Texas Intermediate) were at $92.63, down by 1.18%.

October crude oil futures on the Multi Commodity Exchange (MCX) were initially traded at ₹8850, down 1.45% from the previous close of ₹8980, and November futures were at ₹8800, down 1.51% from the prior close of ₹8935. Russian Deputy Prime Minister Alexander Novak stated on Monday that Russia could return diesel exports to levels above those outlined by US President Donald Trump under a deal.

Novak told Rossiya-24 state TV channel: "We will see how the situation develops further, but Russia has the capacity to increase diesel fuel exports. By the end of the year, exports could reach 3-3.5 million tonnes per month, returning to the levels seen before the crisis." Warren Patterson, Head of Commodities Strategy at ING Think, and Ewa Manthey, Commodities Strategist, noted that the weakness in the oil market following Trump's announcement of an 'energy ceasefire' between Russia and Ukraine was short-lived.

The market's primary concern has shifted to recent developments in West Asia, particularly Houthi attacks on Saudi Arabia and ongoing risks to oil flows from the Persian Gulf. There is skepticism regarding the Russia-Ukraine energy ceasefire, especially with reports suggesting Russia has exceeded Ukrainian energy targets since Trump announced the deal.

The Persian Gulf may witness increased bypass volumes in the near future, with the Saudi Energy Minister announcing plans to expand pipeline export capacity to 10 million barrels a day, with about 1.2 million barrels per day potentially available for transport within 7-8 weeks. Shipping larger volumes from the Red Sea would necessitate further investment in port loading capacity.

Meanwhile, hurricane activity in the Gulf of Mexico has disrupted offshore operations for US producers, with approximately 605,000 barrels a day of oil production shut in, equivalent to nearly 30% of total US production in the Gulf of Mexico. Output has been recovering in recent days, with up to 1.5 million barrels a day shut-in on Friday.