Oil prices fell sharply as traders awaited President Donald Trump's announcement of what he called a ceasefire in the energy sector between Russia and Ukraine, amid escalating tensions across the Middle East.
Brent crude futures fell below $103 a barrel after rising for two days, while U.S. West Texas Intermediate crude futures traded near $90 a barrel.
Trump announced in a social media post that the ceasefire was effective immediately. He had made a similar statement last month, but Ukrainian President Volodymyr Zelensky denied that a final agreement had been reached.
Ukrainian attacks on Russian oil refineries have significantly disrupted refining operations and contributed to a global diesel shortage, driving up prices and fueling discontent among American voters ahead of the November midterm elections.
While European diesel futures fell by as much as 8.3% on Monday, traders questioned the long-term impact of the additional Russian exports. Moscow said it would ship 500,000 tons after lifting a partial export ban, a fraction of the 28.6 million tons it exported last year, according to data from Kpler.
The International Energy Agency's executive director, Fatih Birol, urged governments to accelerate the release of pledged diesel fuel and consider adding more to the market. In a statement over the weekend, ahead of the agency's board meeting scheduled for October 15, he said the current situation demands immediate attention.
The retreat comes amid near-standstill in diplomatic efforts to reopen the Strait of Hormuz, as Iran’s Supreme National Security Council Secretary Mohsen Rezaei described the US response to Tehran’s seven conditions for reopening the waterway as insufficient, according to Reuters, citing Iranian media on Sunday.
Rezaei called on Washington to clarify the issues that remain unclear to Tehran, while US Treasury Secretary Scott Bisent ruled out a new military confrontation with Iran before the end of the US midterm elections, predicting that the US naval blockade on Tehran would continue for a period ranging between two and four months.
Attacks on Saudi facilities and installations escalate
The stalemate in the diplomatic scene in the Iran war coincided with an escalation in Houthi attacks on civilian targets in the Kingdom, as the General Authority of Civil Aviation announced the death of a Pakistani resident and the injury of 11 others as a result of an attack on King Khalid International Airport in Riyadh on Sunday afternoon.
The authority also announced that King Fahd International Airport in Dammam was attacked on Sunday evening, noting that damage assessment and verification of the safety of facilities are ongoing. Meanwhile, the coalition supporting legitimacy in Yemen announced the interception and destruction of a drone in the Eastern Province of the Kingdom, and a ballistic missile launched by the Yemeni Houthi group towards the Khamis Mushait area.
These developments came after the UK Maritime Trade Operations (UKMTO) recorded 13 attacks on commercial vessels in the Strait of Hormuz and the Arabian Gulf waters between the beginning of October and the 10th, the highest rate of attacks since the outbreak of the war.
Saudi oil exports maintain high levels
Despite the turmoil, Saudi oil exports remained high at the beginning of October, averaging 5.31 million barrels per day, the second highest monthly average since the outbreak of the war, after 7.12 million barrels per day in September, according to preliminary data from Kpler seen by Asharq Bloomberg.
October's data remains preliminary, as it covers the first week of the month, and may change as tanker tracking data becomes available.
The data showed that the decline in exports compared to September was concentrated in the Ras Tanura port on the Arabian Gulf coast, which recorded an average loading of about 2.6 million barrels per day during October, compared to 4.13 million barrels per day in the previous month.
In contrast, shipments to the Red Sea port of Yanbu remained relatively stable at 2.47 million barrels per day, compared with 2.54 million barrels per day in September, after the port became a major outlet for Saudi oil exports during the war.
The East-West pipeline, which carries oil from the Eastern Province to Yanbu bypassing the Strait of Hormuz, resumed operations on September 22, after a nearly 10-day shutdown following a drone attack launched from Iraq.
Saudi Arabia is working on developing alternative routes to Hormuz.
In a related context, Saudi Minister of Energy and Minister of Industry and Mineral Resources, Prince Abdulaziz bin Salman, confirmed during his opening speech at the International Energy Forum in Riyadh that the Kingdom is working on developing additional pipelines to provide alternative routes that avoid the Strait of Hormuz, in order to ensure the continued arrival of energy supplies to global markets.
The minister said that the cost of building alternative pipelines is much less than the cost of not having them, stressing that Saudi Arabia will continue to fulfill its commitments to global energy markets despite the challenges.
Hours after these statements, the Saudi Press Agency reported that Saudi Arabia and Qatar are exploring opportunities to establish pipelines for transporting and exporting oil and gas, within a memorandum of understanding for cooperation in the field of energy signed by Saudi Minister of Energy and Minister of Industry and Mineral Resources, Prince Abdulaziz bin Salman, and Qatari Minister of State for Energy Affairs, Saad bin Sherida Al-Kaabi.
The memorandum includes cooperation in the petroleum and petroleum derivatives, gas and petroleum derivatives, refining, petrochemicals and electricity sectors, in addition to clean hydrogen, renewable energy, energy efficiency and storage.
It also includes exploring joint business opportunities to establish pipelines for transporting and exporting oil and gas, and developing the appropriate infrastructure for energy access, according to the Saudi Press Agency (SPA).
Latest price movements
Brent crude for December delivery fell 1.7% to $102.93 a barrel at 11:21 a.m. Singapore time.
West Texas Intermediate crude for November delivery fell 2.0% to $89.97 a barrel.
