Oil prices traded slightly lower in the early morning in Europe on Monday as U.S. President Trump’s announcement of an “energy ceasefire” between Russia and Ukraine offset this weekend’s escalation in the Middle East.
Brent Crude prices were at $104 per barrel, and the U.S. benchmark, WTI Crude, traded at about $91 a barrel, down by 0.2% and 0.7%, respectively.
The King Khalid International Airport in the Saudi capital Riyadh was hit by the Yemen-based Iran-backed Houthis with ballistic and cruise missiles on Saturday in an attack that killed 13 people and injured more than 300 others. On Sunday, the airport was hit again in another attack that killed one person and wounded 11 others.
Although these attacks have not been aimed at energy infrastructure, the weekend escalation from the Houthis and the recent events in the Saudi-Houthi fight for control of the parts of Yemen with direct access to the Bab el-Mandeb Strait could widen the conflict in the Middle East.
The events “show that risks to supply from the region remain, despite oil flows from the Persian Gulf being at their highest levels since the start of the US-Iran war,” ING’s commodities strategists Warren Patterson and Ewa Manthey wrote in a note early on Monday.
Early on Monday, the market appears to be ignoring the Middle East story and is hoping for a Russia-Ukraine energy ceasefire – announced by the U.S. President – to increase global diesel availability.
Trump has also lifted sanctions on Russian diesel and struck a deal with Vladimir Putin to import Russian diesel, some of it immediately, in an attempt to lower record-high diesel prices ahead of the midterm elections on November 3.
The deal “is not going to solve the tightness in the middle distillate market,” ING’s commodity experts said, but noted that the announcement is pressuring down gasoil cracks on Monday.
“Clearly, in the run-up to the midterm elections, pressure is growing on Trump to address high oil and diesel prices – but in order to see a more meaningful move lower in refined product prices, we will need to see normalisation in the Middle East,” ING’s analysts said.
By Tsvetana Paraskova for Oilprice.com
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