Oil prices slide as US weighs easing sanctions on 'shadow fleet'

By Ahmad Ghaddar

LONDON, Oct 15 (Reuters) - Oil prices fell by about 2% on Thursday as potential US steps to ease restrictions on Russia's "shadow fleet" tankers soothed price concerns, but attacks on ships in the Middle East and Ukrainian strikes on Russian energy infrastructure limited the decline.

Brent crude futures fell $2.28, or 2.2%, to $103.78 a barrel by 0729 GMT, while US West Texas Intermediate crude futures were down $1.34, or 1.4%, to $93.75, reversing gains from the previous session.

Oil prices fell after a US official said on Wednesday that the US administration was considering easing sanctions on some of Russia's unregulated tankers, a move that could help lower freight rates and increase flexibility in diesel shipments, PVM Oil analyst John Evans said.

The discussions are happening days after President Donald Trump temporarily lifted sanctions on Russian diesel fuel, to ease a surge in prices globally. The new talks centre on Washington potentially allowing "legal oil" to flow on previously sanctioned vessels, the US official said.

Prices, however, were still finding support from an escalating conflict between Saudi Arabia and Yemen's Houthis and renewed attacks on ships in the region. 

A container ship and a dry bulk carrier both sank near the strait in the past 24 hours after being hit by projectiles in separate incidents, maritime officials said on Wednesday.

Attacks around the waterway have surged over the past 10 days, with Iran saying it was stepping up strikes in response to the US blockade of its ports and tougher sanctions introduced last month.

"The ongoing conflict between Saudi Arabia and the Houthis is keeping a geopolitical premium in oil markets but energy infrastructure has not been attacked in the last several days," MUFG analysts said in a note. 

Meanwhile, Ukraine resumed its attacks on Russian refineries with a strike on a plant in the Ryazan region, after Ukrainian President Volodymyr Zelenskiy voiced anger at a "dangerous" withdrawal of US intelligence.

In the US, crude oil and distillate inventories fell, while gasoline stocks rose last week, market sources said on Wednesday, citing data from the American Petroleum Institute.

Crude stocks fell by 11.1 million barrels in the week ended October 9, sources said. That was a much bigger draw than analysts polled by Reuters expected.

Official numbers from the US Energy Information Administration are due at 12 p.m. EDT (1600 GMT), delayed by a day following the Columbus Day holiday on Monday.

(Aditional reporting by Sam Li and Trixie Yap; Editing by Sonali Paul and Joe Bavier)