The most significant development in oil markets this week came from Washington rather than the Middle East. On Friday, President Trump announced an agreement with Vladimir Putin for Russia to immediately supply more than 300,000 tonnes of diesel to US and international markets, followed by another 500,000 tonnes in November and one million tonnes thereafter. The US has also temporarily eased sanctions on Russian diesel, a remarkable reversal given Washington's efforts to restrict Russian energy revenues since the invasion of Ukraine.
The agreement comes as diesel prices remain near record highs ahead of November's US midterm elections. However, the immediate volumes are relatively modest, and questions remain over whether Russian refineries can deliver the promised supply amidst increasing attacks from Ukrainian drones. The announcement came after Friday's oil futures settlements, meaning its full impact is not reflected in the benchmark prices below.
Benchmark snapshot
Brent: $104.72/bbl (+2.4% WoW)
WTI: $91.85/bbl (+0.8% WoW)
Dubai: $108.96/bbl (+0.4% WoW)
Oman: $108.36/bbl (−0.1% WoW)
Brent finished the week above $104, despite efforts to bring additional supply into the market. The divergence between Brent and WTI also widened slightly, reflecting the continued pressure on internationally traded crude.
As anticipated in last week's OilSight, OPEC+ left its November production targets unchanged. The decision had relatively little bearing on immediate supply conditions. Several Gulf producers are still pumping below their quotas because of export constraints, meaning further increases in production targets would not necessarily translate into more oil reaching consumers.
The physical market nevertheless showed signs of resilience. Producers have continued redirecting exports towards alternative routes, particularly Saudi Arabia's Red Sea facilities and terminals along the Gulf of Oman. However, the situation around Hormuz deteriorated during the week. Shipping data showed that just seven commodity vessels passed through the Strait on Tuesday, the lowest number since July. Crude movements fell to approximately 10.1 million barrels per day, around 74% of pre-war levels. Increased exports through alternative routes have helped compensate for the decline, but the margin for further disruption is narrowing.
Attention also shifted towards refined fuels. On Wednesday, the International Energy Agency agreed to accelerate emergency reserve releases, prioritising diesel. However, the approximately 100 million barrels being discussed largely concern supplies already committed under March's 400-million-barrel programme, rather than an entirely new intervention. This distinction matters because accelerating existing reserves provides temporary relief without increasing global refining capacity.
There was some positive news from China, where authorities approved approximately 3.7 million tonnes of refined fuel exports for October, reversing an earlier suspension. The additional fuel should ease pressure on Asian markets, although volumes remain below September's levels.
Meanwhile, the US faced a separate supply shock. Hurricane Isaias forced producers to suspend around 1.5 million barrels per day of Gulf of Mexico production, equivalent to approximately 72% of the region's output. This contributed to Thursday's sharp rally, alongside renewed attacks on tankers and uncertainty surrounding Middle Eastern exports.
The geopolitical situation remains unsettled heading into the weekend. Trump suggested Washington would refrain from further strikes against Iran before November's elections, offering some relief to oil markets. However, Saturday's attack on Riyadh's international airport illustrates the continued risk to Saudi infrastructure. That latest development came after Friday's close.
What matters next
US-Russia diesel agreement - The central question is whether the promised shipments materially increase global fuel availability or simply redirect existing Russian exports. Refinery constraints could limit the agreement's impact on prices.
IEA reserve releases - The agency's 14–15 October discussions should provide greater clarity on the timing and composition of emergency deliveries. Diesel availability will matter more than the headline number of barrels.
US Gulf production - A rapid restart following Isaias would remove a source of immediate pressure. Any prolonged disruption to offshore production or refineries would be more consequential.
Hormuz and Saudi Arabia - Shipping through Hormuz has fallen to its lowest level in over two months, while renewed attacks in Saudi Arabia raise further concerns about regional infrastructure. The question is whether further escalation results in sustained reductions in exports or disrupts the alternative routes currently compensating for Hormuz.
In last week's edition, I argued that geopolitical risk alone was insufficient to sustain higher crude prices while physical exports continued recovering. That distinction still holds, but this week's decline in Hormuz traffic suggests the resilience of those exports is being tested.
The US–Russia diesel agreement adds another dimension. Governments are increasingly turning towards politically difficult arrangements and emergency reserves to secure fuel supplies. These interventions may relieve some immediate pressure, but they do little to address the underlying constraints on refining and transportation.
For now, the market is not simply short of oil. It is short of reliable access to the particular fuels and crude grades consumers need, where they need them. That distinction is likely to remain important in determining whether Brent can sustain prices above $100.