Oil ticks lower as Russia diesel supply prospects counter Gulf supply risks

Oil prices slipped on Tuesday, plummeting 0.57 percent to $106.04 per barrel for Brent crude futures, after surging nearly $2 the previous day, traders weighed supply risks from attacks in Saudi Arabia against the prospect of additional diesel from Russia. The sharp decline followed Brent's record-high settlement of $106.65 on Monday.

President Trump announced Russia's agreement to supply diesel to global markets, and his administration lifted US sanctions on Russian fuel to ease Kremlin's war coffers. This additional supply could alleviate tightness in fuel markets, but lawmakers from both parties in the US questioned if Trump's deal with Putin violated US law banning Russian energy imports until Moscow halts its aggression in Ukraine.

Despite the potential relief from fresh diesel supply and steadier Saudi flows, the market remains more apprehensive about the risk of further attacks on Gulf shipping lanes or pipelines than reassured by extra barrels, Tim Waterer, KCM Trade chief analyst, said. Market sentiment is still leaning higher, pending clearer signs of de-escalation.

Concerns about the vulnerability of Gulf energy infrastructure and shipping lanes persisted after Iran-aligned Houthis struck Riyadh's international airport and tanker attacks occurred near the Strait of Hormuz, threatening to disrupt the recovery in Middle East supplies since September, and heightening fears of further disruptions along a critical energy transit route.

OPEC and non-OPEC Participating Countries in the Declaration of Cooperation noted shipping and insurance costs surged to over one-third of the commodity value, hindering efficient crude oil and product movement, Haitham Al Ghais, Secretary General of OPEC, said on Monday.