Brent Settles at $109.86 as U.S. Waives Graham Act Sanctions and Treasury Licenses Russian Diesel Imports

ICE Brent December futures settled at $109.86 per barrel on Friday, Oct. 16, up 4.9% on the week, as the U.S. government moved on two fronts to ease restrictions on Russian fuel. President Donald Trump signed Executive Order 14436 on Oct. 16, waiving most sanctions, restrictions and duties under the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, a week after the Treasury Department authorized transactions involving Russian-origin diesel.

Executive Order 14436 and OFAC General License 135 Explained

The executive order waives the duties in sections 112 and 113 of the Graham Act, including increases on goods from Russia and from the largest importers of Russian crude oil and natural gas, along with a list of the act's sanctions provisions. The White House said the President certified to Congress that the waivers serve U.S. national interests. The order states that sanctions imposed under earlier executive orders on Russia remain in force, and the waivers stay in effect until the President or the Secretary of State determines further action is appropriate.

Separately, the Treasury Department's Office of Foreign Assets Control issued General License 135 on Oct. 9. It authorizes transactions related to the sale, delivery, offloading and importation of diesel fuel of Russian Federation origin, including into the United States, through 12:01 a.m. eastern daylight time on April 7, 2027. It does not authorize debits to accounts of Russia's central bank, National Wealth Fund or Ministry of Finance at U.S. financial institutions.

IEA Says Global Gasoil Supply Fell 1.7 Million Bpd in the Third Quarter

The International Energy Agency said in its Oct. 14 Oil Market Report that global gasoil availability fell 1.7 million barrels per day year on year in the third quarter, to 27.2 million barrels per day. OECD gasoil stocks fell to 565 million barrels in July, their lowest since November 2023. The IEA expects supply to fall short of demand in the fourth quarter and inventory replenishment to be unlikely before the second half of 2027.

Gulf refined product exports reached 1.9 million barrels per day in September, according to the IEA, against 4.7 million before the war. That 2.8 million barrels per day shortfall in Gulf products is larger than the global year-on-year decline in gasoil availability, which is why any new source of diesel draws attention.

EIA Puts U.S. Distillate Inventories at 102.6 Million Barrels

The U.S. Energy Information Administration's Weekly Petroleum Status Report showed distillate fuel inventories at 102.6 million barrels for the week ended Oct. 9, down 2.5 million barrels and equal to 25.8 days of supply. In its October Short-Term Energy Outlook, the EIA said East Coast distillate inventories were 32% below their five-year average and that it expects them to stay 20% to 30% below that average through the winter.

The EIA said retail diesel averaged $6.29 per gallon in September and that it expects prices to stay above $6 in October before easing gradually. Our report on the first Russia diesel waiver and our coverage of the Strategic Petroleum Reserve exchange track the other measures aimed at the same shortage.

Canadian Diesel Supplies Most U.S. East Coast Distillate Imports

The EIA said imports supply about 10% of East Coast distillate consumption and come mostly from Canada into the Northeast, typically peaking between December and February. Canadian refiners serving that market compete with any Russian cargoes that now become eligible under General License 135. Alberta Treasury Board and Finance reported front-month WTI at US$97.97 on Oct. 15, up US$6.48 on the week.

EIA Forecasts $105 Brent in the Fourth Quarter; EIA and Baker Hughes Data Next

The EIA forecasts Brent spot at $105 per barrel in the fourth quarter and retail diesel near $4.50 per gallon in 2027 as global product supply recovers. Friday's December settlement sits $4.86 above that fourth-quarter average. The IEA expects the refining system to return to surplus in the first quarter of 2027, though not enough to offset the 2026 deficit.

The EIA publishes its next weekly petroleum report on Oct. 21, and Baker Hughes reports its rig count on Oct. 23. Our latest rig count report showed 603 U.S. rigs and 217 in Canada.