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Diesel prices fell on Monday after Donald Trump claimed Russia and Ukraine had reached an “energy ceasefire”, although analysts warned a deal was unlikely to bring lasting relief to global fuel costs.
Diesel prices in Europe fell 5 percent to $1,410 a tonne on Monday morning before recovering slightly. Brent crude oil, the international benchmark, fell in early trading but later rose 1% to $105.75 a barrel.
The move comes after the US president said on Sunday that there had been an “energy ceasefire” in the war in Ukraine.
“Effective immediately, there is an ENERGY CEASEFIRE in the war between Russia and Ukraine,” Trump wrote on his Truth Social platform on Sunday. “Both sides agree. Don’t break it!”
Despite Trump’s announcement, it was unclear whether such a ceasefire would come into effect.
Ukrainian President Volodymyr Zelensky said Sunday it was “important that (the energy ceasefire) becomes a reality,” adding that Russian forces attacked a power plant in Kharkiv in the evening.
It was not immediately clear whether Russia had accepted Trump’s deal.
This follows a deal announced by the US president with Moscow on Friday, providing for the marketing of Russian diesel on the global market, as Washington aims to lower fuel prices ahead of November’s midterm elections.
Traders initially shrugged off the move, with diesel prices in Europe closing down just 1.7 percent on Friday. Analysts say the low volume of diesel exports promised by Russia means there will be very little impact on global supply in the short term.
Any possibility of increasing exports over time – as Trump demands – depends on Russia’s ability to repair its refineries that have been battered by Ukraine.
Jim Reid, global head of macroeconomic research at Deutsche Bank, said that while the return of Russian diesel to global markets would help contain prices, “nightly strikes are making the ceasefire increasingly uncertain and highlighting tensions between Washington and kyiv.”
The Trump administration has threatened to end the system of arms purchases from Ukraine to pressure kyiv to stop its major strikes against Russian energy infrastructure, the FT reported on Sunday.
The president’s social media post represents the latest U.S. effort to reduce energy costs, which have soared due to Russia’s war against Ukraine and America’s war against Iran. High oil and diesel prices are weighing on the popularity of Trump and his Republican Party ahead of the US midterm elections in early November.
“Given the political-economic situation, there is a lot of motivation to do more,” said Anthony Yuen, head of energy strategy at Citigroup, who noted that Republican-leaning districts “tend to consume more diesel.”
Wei Li, head of multi-asset investments at BNP Paribas Securities China, said optimism over the deal with Russian President Vladimir Putin had helped push down U.S. fuel oil futures.
The decline occurred even after Houthi forces launched missile strikes on Riyadh International Airport on Saturday.
The attack on the Saudi capital killed at least 12 people and injured more than 300. A second strike on Sunday killed one person and injured 11 others.
Houthi rebel forces in Yemen are attacking neighboring Saudi Arabia, which supports Yemen’s central government in a civil war that began in 2014.
Yuen added that last week’s resumption of Chinese exports of refined petroleum products was further contributing to the decline in diesel prices. “The volume of Chinese exports could be equal to or greater than the Russian volume,” he said.
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