US diesel futures kept sliding on Monday after Russia reopened part of its fuel exports under a deal struck by President Donald Trump. Heating oil futures, the US diesel benchmark, traded at $4.65 a gallon, down 9 cents, after a 4.6% drop on Friday.
Crude went the other way. Brent rose 83 cents to $105.55 a barrel and WTI gained 72 cents to $92.57, wiping out losses of more than 1% from earlier in the session.
That split tells the story. Traders sold diesel on the headline, but the barrels behind it are small, and the forces that pushed fuel to record prices have not gone away.
What Russia agreed to
Trump said on Friday, October 9, that Russia would "immediately" supply more than 300,000 tons of diesel to US and global markets. Another 500,000 tons would follow in November and 1 million tons after that. A further 3 million tons could come later, he wrote, depending on the condition of Russia's refineries.
Treasury acted the same day. Its sanctions office issued a general license that allows Russian diesel to be sold and shipped, including into the United States, through April 7, 2027.
Moscow banned diesel exports in July after Ukrainian drone strikes crippled its fuel supply. On Saturday, the Russian government cleared 500,000 tons for sale abroad and said oil companies could start signing contracts right away, according to state news agency TASS. Deputy Prime Minister Alexander Novak said Russian consumers would not run short.
Why the numbers are small
Diesel markets usually count in barrels, not tons. At the EIA's conversion rate of about 7.46 barrels per metric ton, the first 300,000 tons come to roughly 2.2 million barrels. The US uses about 3.7 million barrels of diesel and other distillates a day. So the first shipment covers around 15 hours of American demand.
Even the full 4.8 million tons Trump described adds up to less than 36 million barrels. That is under 10 days of US use, spread over several months.
"The immediate impact of the deal is questionable, as Russia's refining capacity has been severely reduced," said Tamas Varga, an analyst at oil broker PVM.
Neil Atkinson, a former head of oil markets at the International Energy Agency, told Al Jazeera it was "very hard to see" how Russia could deliver those volumes without shorting its own market. Russia actually imported gasoline and diesel in the third quarter for the first time, according to maritime intelligence analyst Michelle Wiese Bockmann.
Analysts at ING said the Russian supply is squeezing diesel margins but is "not going to solve the tightness in the middle distillate market." In their view, a bigger drop in fuel prices needs Middle East oil flows to return to normal.
Pump prices barely move
Drivers have seen little relief so far. AAA's national diesel average was $6.27 a gallon on Monday. That is about 5 cents lower than a week ago and 26 cents below the record of $6.53 set on September 22. A year ago, diesel cost $3.67.
Supplies are tight. US distillate stocks stood at 105.1 million barrels in the week to October 2, about 13.5% below a year earlier, EIA data show. Aramco's chief has said refilling the world's oil stocks could take up to two years.
On Sunday, IEA head Fatih Birol asked member countries to check whether more diesel releases are needed. He also urged those behind on their pledged volumes to deliver faster, with diesel first in line.
A ceasefire nobody confirmed
Trump went a step further on Sunday. He posted that Russia and Ukraine had agreed to an immediate "ENERGY CEASEFIRE," adding: "Both parties have agreed. Do not break it!"
Kyiv seemed caught off guard. President Volodymyr Zelensky told Axios the ceasefire "was news for me," though he said Ukraine would go along if Russia did. Moscow has not commented. Zelensky said Russian strikes on Ukrainian energy sites went on through Sunday.
This has happened before. Trump made a similar claim on September 14, and both sides kept hitting each other's energy plants in the days that followed.
A real halt would matter more than the diesel deal itself. Ukraine claims its drones have taken more than half of Russia's refining capacity offline, a figure that has not been independently confirmed. Zelensky has offered to stop striking Russian refineries if Moscow stops attacking Ukraine's energy grid.
Pushback in Kyiv and Washington
Ukraine's government called the diesel deal "a weak decision by strong partners." Critics in Congress say it undercuts the Russia sanctions law Trump signed last month.
Seven senators from both parties urged Trump on Sunday to reverse course, Time reported. Republican Sen. Thom Tillis told NBC's Meet the Press there is "a legitimate case for saying the president's not following the law."
Crude still watches the Gulf
Crude has its own set of worries. A missile strike claimed by Yemen's Houthis killed at least 12 people at Riyadh's King Khalid International Airport on Saturday. On Sunday, a drone hit a tanker near Oman's Sohar port. Those attacks, along with reports that the White House is weighing new strike options against Iran, keep Brent above $100.
Goldman Sachs has raised its December Brent forecast to $90 from $85. The bank says prices still carry a risk premium of just over $20 a barrel.
What to watch
- Whether the first Russian cargoes load, and where they go
- Any sign that refinery and power plant strikes have actually stopped
- This week's EIA data on diesel prices and inventories
- Pump prices heading into the November 3 midterm elections