Oil prices slipped on Thursday as traders digested signs that Washington may permit increased use of previously restricted Russian shipping capacity, a move that could reduce freight rates and increase diesel shipment flexibility. By 0729 GMT, Brent crude futures were down $2.28, or 2.2%, at $103.78 a barrel, while US West Texas Intermediate futures dropped $1.34, or 1.4%, to $93.75, reversing gains from the previous session.
PVM Oil analyst John Evans said the reported US government review of some of Russia's "shadow fleet" tankers helped ease market concerns. The discussions follow a recent, temporary lifting of sanctions on Russian diesel by President Donald Trump, implemented to address a surge in global diesel prices. According to a US official, talks are focusing on whether Washington could allow what was described as "legal oil" to move on vessels that had been sanctioned previously.
That potential shift did not eliminate support for prices. Fighting in the Middle East and new maritime attacks provided a countervailing influence. Maritime officials reported that, in the past 24 hours, a container ship and a dry bulk carrier were struck by projectiles in separate incidents and sank near the strait. Attacks around the waterway have accelerated over the past 10 days, and Iranian statements described stepped-up strikes in response to a US blockade of its ports and tougher sanctions introduced last month.
"The ongoing conflict between Saudi Arabia and the Houthis is keeping a geopolitical premium in oil markets but energy infrastructure has not been attacked in the last several days," MUFG analysts wrote in a note, underscoring that while the premium persists, direct hits on energy facilities had not been reported in the recent short window referenced.
Geopolitical risk was compounded by continued military action in Europe. Ukraine resumed attacks on Russian refineries with a strike on a plant in the Ryazan region, following public criticism from Ukrainian President Volodymyr Zelenskiy over what he described as a "dangerous" withdrawal of US intelligence. The strikes on refineries add another layer to the supply-side uncertainty for refined products.
In the United States, market sources citing data from the American Petroleum Institute reported inventory moves that could influence near-term balances. Crude oil and distillate inventories fell last week, while gasoline stocks increased. Crude stocks reportedly declined by 11.1 million barrels in the week ended October 9, a draw that was substantially larger than Reuters-polled analysts had expected. Official data from the US Energy Information Administration are scheduled for release at 12 p.m. EDT (1600 GMT), with the publication delayed by one day because of the Columbus Day holiday.
Traders are therefore balancing three principal forces: the prospect of easing constraints on Russian tanker movements, which could reduce freight and shipment frictions; renewed regional violence that has elevated a geopolitical risk premium for oil; and inventory signals from the United States that point to a tighter crude balance than many had anticipated. These interacting drivers left prices lower on the session but prevented a larger sell-off as participants reassessed near-term supply flexibility and risks to maritime transport.
Key data points and developments in this move included:
- Brent at $103.78 a barrel, down $2.28 or 2.2% by 0729 GMT.
- US West Texas Intermediate at $93.75, down $1.34 or 1.4%.
- US crude stocks reported to have fallen by 11.1 million barrels in the week to October 9.
- Reports that the US administration is considering allowing some previously sanctioned vessels to carry "legal oil."
- Recent maritime strikes in the strait with two vessels sinking after projectile hits, and an uptick in attacks over the past 10 days.
- Ukraine struck a refinery in Russia's Ryazan region amid tensions over US intelligence support.