MORNING BID AMERICAS-Diesel diplomacy

By Reuters News

By Mike Dolan

Oct 12 (Reuters) - What matters in U.S. and global markets today

By Mike Dolan, Editor-At-Large, Finance and Markets

Diesel dominated another weekend of noisy geopolitics, with confusion surrounding US moves to temporarily lift sanctions on Russian diesel exports and claims of an Ukraine-Russia energy sector ceasefire that neither side seems sure of.

Just weeks before US midterms the near record price of US diesel seems to have prompted US President Trump push the move - even though the effects of the sanctions waiver seem to token given Russia has a domestic shortage itself and the US is a net exporter. What’s more, Kyiv insists Russia has not observed any ceasefire on its energy infrastructure even if the Ukrainian side was open to that deal. More questions than answers.

I’ll get into all that and more below.

But first, check out my latest column asking whether central banks will be "good cops" or "bond villains" amid the debt market crunch.

DIESEL DIPLOMACY

While the Trump administration’s focus, the war between Iran-backed Houthis rebels in Yemen and US-backed Saudi Arabia intensified amid multiple deadly Houthi strikes on Riyadh airport.

Despite all that, crude is slightly lower at about $103 per barrel.

However, world markets are thin so far today with Tokyo closed for a holiday. Restive US Treasury debt gets something of a break on Monday too as US bond markets - though not Wall Street - are closed for Columbus Day.

There was some marginal relief for bond yields at the end of last week, but energy prices will be watched closely now with the September CPI inflation report this week set to show headline annual inflation as high as 3.7%, though core rates are likely to be more than a percentage point lower.

It’s a busy week ahead all around, however. The International Monetary Fund’s annual meeting in Bangkok delivers its latest World Economic Outlook on Tuesday, and then the big US banks kick off the third quarter earnings season on Wednesday. Finally, major tech bosses gather for an AI conference in Dublin.

CHART OF THE DAY

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The amount of diesel involved in the proposed US sanctions waiver on Russian diesel is tiny - equivalent to about 12 hours of global supply and unlikely in make any meaningful difference to pump prices for Americans within the next few weeks. But Washington's move still alarmed Kyiv and European capitals and could further undermine Transatlantic relations unless Russia were actually to cease hitting Ukrainian energy installations as the winter approaches. Ukrainian President Volodymyr Zelenskiy said Kyiv is willing to stop hitting Russian refineries if Moscow honors its side of the proposed agreement.

TODAY'S EVENTS TO WATCH

  • US bond market closed for Columbus Day holiday

  • IMF and World Bank meetings start in Bangkok

  • Cleveland Federal Reserve President Beth Hammack speaks

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