Gasoil falls 3% on Russian diesel pledge while Brent barely moves

Brent's fall was small and getting smaller. Futures gave up 11 cents, or 0.11 per cent, to $104.61 by 0627 GMT ^[4], after both benchmarks had been down more than 1 per cent earlier in the session ^[6]. Tim Waterer, chief analyst at KCM Trade, said the announcements eased some of the immediate supply pressure ^[9]. He then put a limit on it. "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," Waterer said ^[10].

The diesel is where the tonnage is, and the tonnage is modest. According to Trump, Russia will send 300,000 tons now, 500,000 in November and 1 million after that ^[1][2], a total of at least 1.8 million tons ^[18]. The first tranche works out at 7.5 barrels a ton ^[19], so the full schedule is about 13.5 million barrels ^[20]. The IEA forecasts global diesel consumption at close to 29 million barrels a day ^[8]. The schedule is therefore about 0.47 of one day's demand ^[21], and the first tranche about 7.8 per cent of one day's ^[22]. Gasoil futures still fell 3 per cent to $1,436 a ton ^[7], about 27 times Brent's percentage move ^[24].

We think the gasoil move is roughly the right size for the diesel, and the Brent move is roughly the right size for a ceasefire nobody has verified. Crude has a different problem. Goldman Sachs estimates a risk premium of just over $20 a barrel ^[16], and Brent at $104.61 sits $14.61 above its $90 December forecast ^[23]. Its analysts wrote: "We maintain our base case that continued adaptation of Mideast supply will eventually reduce crude oil prices, while potential renewed escalation still poses significant net upside risk" ^[15]. Russian diesel and a Kyiv-Moscow truce touch neither the Riyadh airport strikes ^[12] nor the tanker attacks near Hormuz and Oman ^[13], so we would not expect them to close that gap.

The view can fail in more than one direction. Moscow and Kyiv could confirm the ceasefire and the November cargoes could load on schedule, in which case gasoil's fall is the start of a longer one. The ceasefire could collapse, and the supply pressure Waterer described would come back ^[9]. And we are wrong if Brent falls below $100 while the Gulf attacks continue, because the premium would then be smaller than Goldman's estimate.