Oil, Gasoline Prices Drop on Easing ME Tensions, China Trade Jitters

Crude oil and gasoline prices fell sharply today, with crude dropping to a five-month nearest-futures low and gasoline sliding to a 4.5-year low. Prices came under pressure as easing tensions in the Middle East reduced the likelihood of supply disruptions following a ceasefire agreement between Israel and Hamas.

Losses in crude accelerated after global equities declined amid renewed trade tensions with China. US President Donald Trump threatened a “massive increase” in tariffs on Chinese goods, citing recent “hostile” export controls on rare-earth minerals.

Adding to the bearish sentiment, Saudi Arabia’s state-owned Aramco decided to keep the price of its main oil grade for Asian customers for November delivery unchanged — contrary to expectations of a 30-cent-per-barrel increase. The move signalled weaker energy demand and further weighed on prices.

However, crude prices found some support after OPEC+ agreed on Sunday to raise its crude production target by 137,000 barrels per day (bpd) starting in November — well below market expectations of a 500,000 bpd increase. OPEC+ is currently in the process of boosting output by an additional 1.66mn bpd to fully reverse the 2.2mn bpd production cut implemented in early 2024. OPEC’s September crude production rose by 400,000 bpd to 29.05mn bpd, the highest level in two and a half years.

Meanwhile, reduced production in Russia lent support to oil prices after Reuters reported that Russia’s Kirishi refinery — with a capacity of 160,000 bpd — had halted most operations following a Ukrainian drone strike and fire on Saturday. Ukraine has targeted at least 15 Russian refineries over the past two months, worsening the fuel crunch in Russia and curbing its export capacity. Ukrainian drone and missile attacks have reduced Russia’s total refined-product flows to 1.94mn bpd in the first half of September, the lowest monthly average in more than three years.

A decline in global crude oil stored on tankers also provided some price support. Vortexa reported on Monday that crude held on tankers stationary for at least seven days fell by 7% week-on-week to 82.81mn barrels in the week ended October 3.