Oil prices fell on Monday as traders bet that a surprise energy ceasefire between Russia and Ukraine and a new diesel supply deal with Moscow would ease immediate pressure on global fuel markets, even as escalating conflict in the Middle East kept Brent crude anchored above the $100-a-barrel mark.
Brent crude futures for December delivery fell $1.54, or 1.47%, to $103.18 a barrel by 0154 GMT, while US West Texas Intermediate (WTI) crude dropped $1.54, or 1.68%, to $90.31 a barrel. ICE gasoil futures, the benchmark for European diesel, tumbled 3% to $1,436 per barrel.
The declines followed US President Donald Trump’s announcement on Sunday that Ukraine and Russia had agreed to an immediate “energy ceasefire”, halting attacks on each other’s energy infrastructure. Trump also said on Friday that Russia would immediately supply more than 300,000 metric tons (2.25 million barrels) of diesel to US and global markets, with another 500,000 tons in November and a further 1 million tons “immediately thereafter”.
The diesel volumes, while symbolically significant, represent a fraction of global demand. The International Energy Agency (IEA) forecasts global daily diesel consumption at close to 29 million barrels. According to analysts, the total volumes promised by Trump amount to roughly 12 hours of global supply.
“Questions remain over the validity and longevity of any such ceasefire, and without clearer evidence that it will actually hold, the extent of the pullback is likely to stay limited,” said Tim Waterer, chief market analyst at KCM Trade.
A Contentious Ceasefire
The ceasefire announcement drew immediate skepticism from Kyiv. Ukrainian President Volodymyr Zelensky told US outlet Axios that Trump’s declaration “was news for me,” adding that while Ukraine would agree to an energy ceasefire if Russia did, he had not been informed of any agreement. The Kremlin declined to comment, and Ukrainian officials noted that Russian attacks on energy infrastructure had continued despite the announcement.
The deal has also drawn criticism from US allies. Canadian Prime Minister Mark Carney said the diesel agreement “is in direct opposition to the efforts of Ukraine, Canada and our allies to create peace and stability in Europe”. French President Emmanuel Macron said France supports a “real energy ceasefire,” noting that Russia “continues to refuse that, by lately intensifying further its strikes on Ukrainian infrastructure”.
Russian authorities said they had partially lifted a ban on diesel exports, which Moscow announced in July after Ukrainian drone attacks on Russian refineries.
IEA Urges Faster Reserve Releases
The IEA has moved to address diesel market tightness. On October 7, member states agreed to accelerate the release of approximately 100 million barrels from emergency reserves, with diesel prioritized over crude. IEA Executive Director Fatih Birol said on Sunday that all members should assess whether additional diesel releases are necessary and urged countries that have not yet fully delivered pledged volumes to accelerate their remaining releases.
The agency’s members still hold reserves equivalent to approximately 1.1 billion barrels, including more than 200 million barrels of diesel. France has pledged to release 10 million barrels of diesel from its strategic stocks.
Middle East Conflict Supports Prices
Despite the bearish supply news from Russia, the intensifying Middle East conflict continues to support crude prices. The Houthis claimed responsibility for a missile strike on Riyadh’s King Khalid International Airport on Saturday that killed 12 people, including four Saudi nationals and eight foreign nationals, and wounded more than 300. Saudi authorities reported further injuries in a new attack on the airport on Sunday.
The strike is part of a broader escalation linked to the wider war with Iran that the US and Israel launched in February 2026. The Houthis have renewed warnings to airlines against using Saudi airports and have declared Saudi airspace a military operations zone.
The Strait of Hormuz, through which roughly one-fifth of global oil and liquefied natural gas was transported before the conflict, remains a flashpoint. UK Maritime Trade Operations reported over the weekend that a tanker was struck by a drone near Sohar anchorage in Oman, while another was damaged by an unknown projectile while transiting the Strait. Since late February, 93 ships have been hit and 24 seafarers killed in the waterway.
US President Donald Trump said on Saturday that Washington was considering joining Saudi strikes on the Houthis, a further spillover from the wider war with Iran.
Goldman Sachs Raises Forecast
Goldman Sachs raised its December 2026 Brent crude price forecast to $90 a barrel from $85 previously, citing persistent supply risks in the Middle East. The bank’s analysts, led by Daan Struyven, maintained their base-case view that continued adaptation of Middle East supply would eventually reduce crude prices, but warned that renewed escalation poses significant net upside risk, estimating a risk premium of just over $20 a barrel.
The investment bank kept its 2027 average Brent forecast unchanged at $80 a barrel and expects WTI to average $81 in December 2026 and $73 in 2027. Goldman warned that Brent could average around $125 per barrel in 2027 if average Gulf output remains 5 million barrels per day below February 2026 levels — compared with a shortfall of just 300,000 barrels per day under its base case.
“In the short term, the market is caught between two opposing forces: the prospect of incremental Russian supply and the reality of escalating Middle East tensions,” said Waterer. “Until the ceasefire is proven to hold, the downside is likely to be limited.”
Gulf of Mexico Recovery
In the US Gulf of Mexico, energy majors Shell, Chevron and BP were seeking to redeploy personnel and restore production at their platforms after Hurricane Isaias made landfall early on Saturday. The storm had prompted precautionary shutdowns across the region, adding a further layer of supply uncertainty to already volatile markets.
