Oil prices split as U.S. sanctions shift and Middle East
Traders reacted differently to two conflicting developments on Thursday: the possibility of relaxed U.S. sanctions on Russian oil and renewed violence in Middle Eastern shipping lanes. The potential for increased Russian crude supply contributed to a decline in the global benchmark, while attacks near critical chokepoints lent support to U.S. crude prices. December delivery of Brent crude dropped by 0.2% to $106 per barrel by 2:49 p.m. ET, whereas November delivery of West Texas Intermediate climbed 3.6% to $98 per barrel.
Analysts at Standard Chartered have cautioned that crude prices will remain high regardless of recent fluctuations, with significant upward risks persisting. The political context is clear: with U.S. midterm elections scheduled for November 3, pressure is mounting to address raised fuel costs. Former President Trump recently declared that Russia would immediately supply 300,000 tonnes of diesel to the U.S. and global markets, followed by 500,000 tonnes in November, 1 million tonnes later, and eventually 3 million tonnes—though the final volume hinges on Russian refinery conditions.
This represents a dramatic reversal in U.S. energy policy, as the world’s largest diesel exporter now seeks to partner with a heavily sanctioned energy producer. However, analysts question Russia’s ability to meet these commitments. Ukrainian strikes have already damaged refining capacity, and domestic shortages combined with export restrictions are straining supply. Additionally, Moscow has repeatedly violated a temporary energy truce brokered by Trump, continuing to target Ukrainian energy infrastructure. According to Standard Chartered, even if hostilities ceased, repairing damaged refineries and restoring normal output would take time.
Sanctions reversal won’t boost supply
There is another complication: the announced diesel shipments will not increase global supply. Any barrels sent to the U.S. or new buyers would merely replace existing deliveries to other markets, leaving total supply levels unchanged. Meanwhile, OPEC officials have identified soaring shipping and insurance costs, now exceeding one-third of the commodity’s value on some routes, as a major obstacle. Even if exports recover, longer transit routes, higher premiums, and reliance on alternative paths will keep delivery expenses raised.
Political agreements may improve market sentiment, but they cannot address damaged infrastructure or restore pre-war trade efficiency. The instability of regional energy networks became evident over the weekend. Yemen’s Iran-backed Houthis took credit for missile strikes on King Khalid International Airport last week, followed by attacks on Dammam Airport and an intercepted missile over Riyadh on October 12. These incidents illustrate how overlapping conflicts in the Middle East, including tensions between the U.S. and Iran, as well as the renewed Saudi-Houthi conflict, pose independent threats to supply chains.
Middle East attacks disrupt oil routes
Such attacks demonstrate that even if export volumes recover, the routes transporting them remain exposed. On the natural gas front, Standard Chartered anticipates that European prices will stay raised as early-season cold weather boosts demand. A recent cold snap in Europe tightened the balance between heating requirements and storage injections. Demand in the CNWE’s LDC region surged by 26% week-over-week, the largest absolute and relative increase in a single week, while storage injections rose by 8%. Norwegian gas from the Continental Shelf and LNG shipments to Europe provided some relief, but not enough to counter the demand spike. As a result, TTF gas prices climbed 10.2% over the past week to €85.83 per MWh.
