Oil falls as Russia diesel supply prospects counter Gulf supply risks

Oil prices fell on Tuesday as traders evaluated potential supply risks from attacks on Saudi Arabia while considering the possibility of additional diesel from Russia. Brent crude futures dropped $1.30, or 1.2%, to $105.35 a barrel, and US West Texas Intermediate crude futures declined $1.25, or 1.3%, to $92.49 a barrel. Earlier in the week, Brent had hit its highest level since September 15.

US President Donald Trump announced that Russia would supply diesel to global markets, prompting the temporary lifting of US sanctions on Russian fuel. This move aimed to deprive Moscow of revenue for its war in Ukraine. However, the US market showed skepticism regarding the Russia-Ukraine energy ceasefire, with reports suggesting Russia had already hit Ukrainian energy targets.

The energy crisis has led to concerns over the vulnerability of Gulf energy infrastructure and shipping lanes, as Iran-aligned Houthis attacked Riyadh's international airport and tanker attacks were reported near the Strait of Hormuz. These incidents have raised fears of further disruptions along a crucial energy transit route.

Despite the diesel supply from Russia and more stable Saudi flows, the market remains more apprehensive about potential further attacks on ships or pipelines in the Gulf than reassured by additional barrels. Tim Waterer, chief analyst at KCM Trade, stated that until clearer signs of de-escalation are seen, the market is likely to continue its upward trend.

OPEC and non-OPEC participating countries have revised down their oil demand growth forecast for the year to 400,000 barrels per day from 1.4 million bpd at the start of the year.