Market snapshot
Supply gains pressure prices while conflict keeps risk premium alive
Merchants and portfolio managers heading into the next trading session face a market that is being tugged in two directions. On the one hand recent developments point to rising available supply that could exacerbate an already forecasted year-end glut. A crude oil pipeline connecting the semi autonomous Kurdistan region in northern Iraq to Turkey resumed operations after a two and a half year legal stoppage and is expected to add up to 190,000 barrels per day to the international market. On the other hand, the battle over Russia’s export infrastructure has intensified, keeping a geopolitical risk premium on crude and refined products and blunting what would otherwise be a more definitive bearish signal.
Fundamental drivers and price outlook
Surplus signals clash with a persistent geopolitical price floor
Near term supply expectations have been nudged higher twice in as many days. Reuters reporting suggests that OPEC and its partners including Russia will likely agree to increase their output target by at least 137,000 barrels per day at the October 5 meeting. That would come on top of a cumulative quota rise of 2.5 million barrels per day since April. Whether members can physically deliver that additional output is an open question, but the signal from the group is plainly one of added volumes to the market.
Traders should not read those supply signals as a guaranteed path to lower prices. Brent briefly climbed above $70 a barrel last Friday, a level not seen in over two months, before retreating. That price action highlights the role of geopolitics as a barometer for risk. While macro indicators and supply math point toward softer prices, persistent attacks on Russian energy installations and policy responses from Moscow have kept backwardation and refined product tightness on the radar.
Diesel and refined products
Strikes on facilities push Russia to curb exports and lift margins
Ukraine’s renewed drone campaign has focused on refineries, pipelines and export terminals. Recent attacks hit Salavat, one of Russia’s largest petrochemical complexes, for the second time in less than a week and struck the Black Sea port of Novorossiisk. Those operations prompted Moscow to announce a partial ban on diesel exports through the end of the year and to extend an existing gasoline export ban. The diesel restriction applies to traders but not to refiners, which account for about three quarters of total exports. Even so the announcement triggered a sharp rise in diesel prices globally.
Diesel market tightness is visible in several data points. Russia shipped around 880,000 barrels per day of diesel in 2024, about 12 percent of global seaborne diesel exports, according to analytics firm Kpler. European diesel refining margins jumped 8 percent to their highest level since February 2024, based on LSEG data. U.S. distillate inventories, which include diesel and heating oil, stood 11 percent below their 10 year average last week according to the Energy Information Administration. Those supply and inventory dynamics support strength in refined product spreads even as crude faces potential downward pressure from added barrels elsewhere.
There is also a revenue dimension to the refined product flows that markets will be watching. Seaborne refined product exports generated around $170 million per day in August, translating to roughly $5.3 billion for the month, according to the Centre for Research on Energy and Clean Air. That stream of earnings is significant for exporters and informs the policy choices seen in Moscow.
Trade logistics and sanction workarounds
Shadow fleet growth complicates the sanction picture
Western measures to limit Russian energy revenue have been designed to avoid a disruptive global price spike while constraining Moscow’s receipts. The price cap regime and other measures have not fully choked exports. Instead they have encouraged the growth of a so called shadow fleet of tankers used to obscure cargo origin and destination. In August 64 percent of Russian crude exports were carried on shadow fleet tankers, an 11 percent increase from the prior month, according to CREA. That trend matters for market liquidity, insurance costs and the practical flow of barrels, and it will remain a factor traders must price in when sizing risk.
Macro and policy cross currents
Sanctions, acquisitions and domestic politics will influence next moves
Beyond Russian operations, other policy actions add complexity to the energy outlook. The United Nations reimposed sanctions on Iran over its nuclear programme and the European Union confirmed those measures. Such developments can alter crude availability in regional markets and create reactive flows that ripple through tanker routes and refining patterns. Corporate activity is also relevant. TotalEnergies moved to acquire U.S. upstream gas assets, an action intended to bolster feedstock sources for its liquefied natural gas business.
On the demand side, Canadian natural gas producers cut output in response to record low prices. That example underscores how price signals rapidly feed into supply decisions in the gas market. In the United States domestic politics add another layer. The U.S. administration has emphasized lower energy costs as a priority. Policy responses to rapidly rising fuel prices can have immediate effects on market sentiment and short term flows, which traders should watch closely.
Trading implications
Where to look for near term moves and how to size positions
For the coming session focus on headline flow and margin moves. Crude futures will react to updates from OPEC+ on any formal quota increase. Market reaction will be shaped by commentary on members’ ability to raise production. The pipeline restart from Kurdistan to Turkey puts incremental supply into the Mediterranean and Black Sea corridors that affect regional spreads and refinery sour crude slates. Watch loading schedules and any early shipping reports for confirmation that the 190,000 barrels per day of capacity is converting into actual liftings.
Refined product complexes are likely to remain more volatile. Diesel cracks have shown a quick response to Russian export policy announcements. That sensitivity suggests spread trades that favor products over crude could offer defensive exposure against a backdrop where crude weakens while product tightness persists. Monitor inventory releases for signs of destocking or restocking. U.S. distillate data will be particularly important given the 11 percent deficit versus the 10 year average.
Risk factors and event triggers
Items that could move prices during the session
Key triggers include fresh reports of attacks on Russian export infrastructure, confirmation of OPEC+ quota decisions and operational updates on the Kurdistan Turkey pipeline. Shipping and chartering developments tied to the shadow fleet will matter for prompt crude availability. Announcements from major refiners about run cuts or maintenance could alter product balances quickly. Finally any political signals related to sanctions enforcement or changes in trade policy may prompt rapid re pricing of risk premia.
In sum the market opens with more potential supply but also a persistent set of geopolitical and logistical constraints that will determine whether prices slide or remain supported. Traders should expect headline driven volatility and prepare for scenarios where crude softens while products stay firm. Position sizing and stop management will be essential as the next session unfolds.
