Oil eases as markets assess potential waiver on Russian energy, Middle East supply risks

Oil prices declined on Tuesday as investors considered the potential waiver of sanctions and tariffs on Russian energy exports, announced by US President Donald Trump on Friday night. However, concerns about potential attacks on Saudi Arabia and Yemen maintained worries about Middle East supply disruptions. Brent crude futures dropped 49 cents, or 0.45%, to $109.06 a barrel, while US West Texas Intermediate (WTI) crude for November delivery fell 0.33% to $103.32.

The December contract saw a 0.47% reduction to $98.08. Before Tuesday, Brent had climbed to $110.70 per barrel, the highest level since May 20. The executive order, which waives key US sanctions and tariffs on Russia, including duties on its goods and penalties for purchasing its oil and gas, is still awaiting final approval. Secretary of State Marco Rubio stated that officials are seeking more time to assess the situation.

Russia's crude oil production rose by 65,000 barrels per day in September to 8.43 million barrels per day (bpd), but was still 870,000 bpd below the previous year's levels, according to the International Energy Agency. Although the possibility of increased Russian diesel supply provides some theoretical relief, traders are more concerned about the ongoing risk of further damage to energy infrastructure in the Gulf region.

Houthis, Iran-aligned fighters, claimed responsibility for several attacks on Saudi energy, airport, and military targets on Monday, including an Aramco site in Yanbu, the Shaybah oilfield, King Khalid International Airport in Riyadh, and Abha airport. While Saudi authorities have not officially confirmed these allegations, Reuters has been unable to independently verify them.

Additionally, 58 people were killed and over 200 injured in a recent attack by Houthis on a government security forces training camp in Yemen's Shabwa province. The renewed attacks have heightened fears about regional stability and emphasized the ongoing risks to energy supply from the Middle East, preventing oil prices from falling below $100 a barrel.

US crude oil inventories were projected to have decreased last week, along with product inventories, according to a preliminary Reuters survey on Monday.