As the conflict in the Middle East continues, international oil prices have risen above $100 per barrel, with a recent diesel supply agreement between the United States and Russia adding complexity to the global oil market. While there are hopes that increased supply of Russian diesel could stabilize prices, analysts suggest the impact may be limited due to the small scale of the supply.
According to the Korea National Oil Corporation, the spot price of Dubai crude, a benchmark for Middle Eastern oil, fell by $2.20 to $108.50 per barrel on October 9. In contrast, Brent crude rose by $0.44 to $104.72, and West Texas Intermediate (WTI) increased by $0.36 to $91.85.
International oil prices have remained high since the onset of the Middle East conflict. Although there is downward pressure from the potential recovery of oil exports from the region and negotiations between the U.S. and Iran, disruptions in the Strait of Hormuz and ongoing clashes between Saudi-led coalition forces and Houthi rebels have countered these factors. On October 10, a Houthi attack on King Khalid International Airport in Riyadh resulted in 12 deaths and 309 injuries.
Recently, President Donald Trump announced on October 9 via social media platform Truth Social that he had reached an agreement with Russian President Vladimir Putin regarding diesel supply. To facilitate this, the U.S. Treasury Department has temporarily eased sanctions on Russian diesel imports until April 7 of next year, marking a shift from the ban on Russian oil imports that has been in place since the early days of the Russia-Ukraine war in 2022.
According to reports from Bloomberg and other outlets, Trump stated that Russia would supply approximately 4.8 million tons of diesel. This includes an immediate supply of over 300,000 tons, with an additional 500,000 tons in November and 1 million tons thereafter, depending on refinery conditions, potentially totaling 3 million tons more.
On October 10, the Russian government announced plans to supply 500,000 tons of diesel. Following this news, the price of ultra-low sulfur diesel futures in the U.S. dropped by more than 4% on October 9.
However, some analysts predict that the volume of Russian diesel exports resulting from this agreement will be limited. The 4.8 million tons translates to about 36 million barrels, which is only enough to meet U.S. diesel consumption for 10 days and about 1.2 days of global consumption, estimated at around 30 million barrels per day. Since this supply will be distributed not only in the U.S. but also in the global market, the actual impact on prices may be minimal.
Michael Lynch, a researcher at the U.S. Energy Policy Research Foundation, told ABC News, "The supply of Russian diesel is like rearranging deck chairs on the Titanic. It may lead to a slight local price drop, but it won't bring about any significant changes in prices across the U.S. or globally."
Additionally, Russia is facing its own challenges, including attacks on its refining facilities in Ukraine and domestic fuel supply issues, raising questions about whether the announced volumes will be delivered as planned.
In South Korea, the expected stabilization of diesel prices contrasts with the burden of rising crude oil import costs. If Russian diesel enters the global market, it could alleviate some cost pressures for the freight and logistics sectors that rely on diesel. However, a decline in diesel export prices could exert downward pressure on the profit margins of domestic refiners.
As long as supply uncertainties from the Middle East persist, the cost of crude oil imports in South Korea is likely to remain high, continuing to impact production costs in energy-intensive industries such as petrochemicals.
The government's current price cap system for petroleum products may also be affected by fluctuations in international oil prices. Currently, the supply price cap for refiners is set at 1,784 won per liter for gasoline and 1,773 won for diesel. If international oil prices surge again, refiners' cost burdens will increase, potentially leading to greater financial strain on the government to maintain these price caps.
* This article has been translated by AI.
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