Oil prices declined on Monday, with Brent crude slipping 1.47% to $103.18 a barrel and West Texas Intermediate falling 1.68% to $90.31, even as fresh tanker attacks near the Strait of Hormuz underscored the fragility of Middle East supply routes.
The market's focus shifted to President Donald Trump's announcement of a Russia-Ukraine energy ceasefire and a separate deal that could bring more Russian diesel to global markets. Under the arrangement, Russia would supply over 300,000 metric tons of diesel to the US and global markets immediately, followed by 500,000 tons in November and an additional 1 million tons thereafter. ICE gasoil futures dropped about 3% in tandem with crude.
Traders appeared to price out the geopolitical risk premium before the ceasefire was fully verified. Tim Waterer, chief analyst at KCM Trade, told Reuters that the announcements eased some immediate supply pressure but cautioned that "questions remain over the validity and longevity of any such ceasefire." Ukraine's President Volodymyr Zelenskiy said he was still awaiting details, and Moscow had not publicly confirmed the agreement. Russian attacks on Ukrainian energy infrastructure continued after Trump's statement.
Meanwhile, physical disruptions persist. A tanker was struck by a drone near the Sohar anchorage in Oman over the weekend, and another vessel was damaged by an unknown projectile while transiting the Strait of Hormuz, according to UK Maritime Trade Operations. Tanker attacks around the strait have reached their highest weekly level since the Iran war began.
Amrita Sen, founder of Energy Aspects, argued last week that futures were understating these disruptions. "I find it fascinating that the market is happy to ignore events on the ground," she told CNBC, pointing to infrastructure damage, disrupted shipping, and an unusually severe tanker shortage. Sen suggested that some physical crude should effectively be valued much closer to $150 a barrel once delivery constraints are considered.
Middle East exports have recovered from the worst of the conflict, but moving those barrels remains exceptionally expensive. Tanker rates from the Middle East to Asia recently exceeded $1.2 million per day, compared with roughly $30,000 in January. Freight that once represented around 3% of a delivered barrel now accounts for roughly 27%.
Those elevated freight costs help explain why Brent remains above $100 even as export volumes recover. Stephen Innes wrote at Investing.com that "the oil market will trust the traffic data more than the political promises" until ships move through Hormuz in numbers approaching normal.
This article is for informational purposes only and does not constitute financial advice.
