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

Oil prices declined on Tuesday after reaching a near $2 increase the day before, as traders evaluated potential supply disruptions from attacks on Saudi Arabia and the possibility of extra diesel from Russia. Brent crude futures slipped 61 cents, or 0.57%, to $106.04 a barrel, while US West Texas Intermediate crude futures dropped 47 cents, or 0.5%, to $93.27 a barrel.

Brent futures reached $106.65 on Monday, marking the highest level since September 15. President Donald Trump announced Russia's intention to supply diesel to global markets, and his administration temporarily lifted sanctions on Russian fuel, aiming to alleviate Moscow's revenue from the war in Ukraine. This additional supply might alleviate fuel market tightness and ease some supply concerns that have boosted crude prices.

Nevertheless, lawmakers from both parties in the US criticized Trump's deal with Putin, arguing it contravenes US law prohibiting Russian energy imports until Moscow stops its aggression against Ukraine. KCM Trade chief analyst Tim Waterer noted that while fresh diesel from Russia and more stable Saudi flows provide some reassurance, the market remains more concerned about the risk of further attacks on Gulf energy infrastructure and shipping lanes.

Concerns over the vulnerability of Gulf energy infrastructure and shipping lanes persisted following Iran-aligned Houthis' assault on Riyadh's international airport over the weekend and reports of tanker attacks near the Strait of Hormuz. These incidents threatened to disrupt the recovery in Middle East supplies observed in September and heightened fears of additional disruptions in one of the world's most crucial energy transit routes.

OPEC and non-OPEC Participating Countries in the Declaration of Cooperation expressed that shipping and insurance costs had surged to unprecedented levels of over one-third of the commodity value, complicating the efficient movement of crude oil and products. OPEC's Secretary General, Haitham Al Ghais, stated on Monday that the organization had revised its oil demand growth forecast for this year downward to 400,000 barrels per day from the initial 1.4 million bpd projected at the start of the year.