Oil prices declined on Monday, influenced by anticipations of heightened Russian supplies, following US President Donald Trump’s announcement that Ukraine and Russia had reached an agreement to cease hostilities against each other’s energy infrastructure. The announcement came in the wake of a US agreement with Moscow regarding the provision of diesel supplies. Trump announced the energy ceasefire on Sunday, following Friday’s announcement of the diesel-supply agreement with Russia. Ukrainian President Volodymyr Zelenskiy indicated that he was still awaiting specifics regarding the agreement, whereas there has been no commentary from Russia. Brent crude futures experienced a decrease of $1.42, representing a 1.36% decline, settling at $103.35 per barrel.
Meanwhile, US West Texas Intermediate crude also saw a reduction of $1.42, equivalent to a 1.60% drop, closing at $90.42 per barrel. The ongoing conflict in the Middle East has sustained Brent crude prices above $100 a barrel. Yemen’s Houthis have asserted responsibility for an attack on Riyadh’s international airport on Saturday, resulting in the deaths of 13 individuals and injuries to over 300 others. Saudi authorities also reported injuries in a separate attack on the airport on Sunday. Trump stated on Saturday that the United States was contemplating participation in Saudi strikes against the Houthis, as the conflict expands from the broader war with Iran initiated by the US and Israel in February. Attacks on tankers transiting the Strait of Hormuz have escalated this month, posing a risk to the recovery in Middle Eastern crude exports observed in September.
The United Kingdom Maritime Trade Operations reported over the weekend that a tanker was struck by a drone near the Sohar anchorage in Oman, while another vessel sustained damage from an unidentified projectile while navigating the Strait of Hormuz. Uncertainty regarding the resolution of the conflict continues to be a significant concern for market participants. Analysts at JPMorgan expressed uncertainty regarding the modelling of the eventual outcome, indicating that the bank had initially presumed the US administration would refrain from surpassing specific economic thresholds at the onset of the conflict.
Six months into the conflict, numerous thresholds had been surpassed, yet a definitive exit strategy continued to elude clarity. The increasing risk of additional supply disruptions has heightened the likelihood of elevated oil prices. Daan Struyven noted that recent attacks highlighted the potential for shipping disruptions to escalate and spread. Goldman Sachs warns oil prices could hit $120 a barrel if Middle East vessel attacks intensify. If exports stabilise, the bank anticipates prices will trend back to $80 a barrel. Struyven told that shipping risks are now a key factor influencing oil prices. Goldman Sachs predicts significant gains for crude, with natural gas and refined product prices set to climb too. Struyven noted that supply shocks for petrol and fuels surpassed those in the crude oil market.
