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Irina Slav has been writing about global energy markets since 2007, covering the oil and gas industry, energy security, commodities, and the…

Crude oil prices began the week with a dip on traders' expectations of a boost in diesel fuel supply under the deal agreed by the presidents of Russia and the United States. However, the dip in oil benchmarks came from a much higher point than a week ago, leaving prices palpably elevated.

At the time of writing, Brent crude was changing hands for $107.84 per barrel, with West Texas Intermediate trading at $100.29 per barrel. This compares to $105.61 for a barrel of Brent crude last Monday and $93.37 for a barrel of WTI crude a week ago.

The modest dip followed President Trump’s signing of an executive order on Friday that lifted sanctions on Russian energy, most of which were recently introduced under the Lindsay O. Graham Act that specifically targeted Russia’s energy industry. The act was only signed last month.

The sanctions removal follows an agreement between Trump and Russia’s Vladimir Putin for the supply of about 2.3 million barrels of diesel this month to the United States and other countries to alleviate pain at the pump as diesel prices run at all-time highs. That initial 2.3 million barrels will be followed by another 7.6 million barrels in November and in the following few months.

Analysts have pointed out these volumes are nowhere near significant enough to make a difference in the global diesel market balance, but apparently, oil traders beg to differ. That’s only true up to a point, however, as suggested by the modest decline in prices. This is due to uncertainty about how well the deal would work and how long the sanction exemption lasts – while Iran keeps striking tankers in the Strait of Hormuz.

Per the latest data from Kpler, the seven-day moving average in the waterway has fallen to just 8.5 million barrels daily, from an estimated 20 million barrels daily in the previous week.

By Irina Slav for Oilprice.com

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