Donald Trump, the President of the United States, announced an agreement with Vladimir Putin, the President of Russia, for diesel supply to global markets, which led to a decrease in oil prices. The price of Brent crude oil futures fell by $1.30, equivalent to a 1.2% decrease, reaching $105.35 per barrel, while the price of West Texas Intermediate (WTI) crude oil in the U.S. also decreased by $1.25, or 1.3%, to $92.49 per barrel.
Factors Influencing the Oil Market
This comes as both oil indices had increased by nearly $2 per barrel in the previous trading session, with Brent oil reaching its highest level since September 15. Trump's agreement with Putin could bring more diesel supply to the market and help reduce shortages in global fuel markets. This is amid decreasing concerns about supply that had recently supported crude oil prices.
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Analysts at ING Bank noted significant doubts about the energy ceasefire between Russia and Ukraine in a memo. These concerns have particularly increased in light of reports that Russia has targeted Ukrainian energy facilities since the announcement of this news.
Criticism and Challenges
Lawmakers from both parties in the U.S. criticized this agreement, deeming it apparently a violation of U.S. law that bans energy imports from Russia until the war between Russia and Ukraine ceases. These criticisms could impact the future of this agreement and its effect on oil prices.
Concerns about the vulnerability of energy infrastructure and shipping routes in the Gulf remain a focal point. Following attacks by Yemeni armed forces on Riyadh International Airport and reports of attacks on tankers near the Strait of Hormuz, these concerns have intensified. These incidents could threaten the improvement in Middle Eastern oil supply observed in September.
Cedric Shahab, a senior economist at BMI, predicted that due to the ongoing disagreements between the U.S. and Iran over a potential agreement, crude oil prices will remain high in the coming months. He stated in a program on CNBC that reaching an agreement "may still take several months."
According to Shahab, high oil prices pose a serious challenge for policymakers and will impact global inflation and inflation expectations. According to the American Automobile Association (AAA), the price of diesel reached a record high of $6.5276 per gallon in late September.
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