Key Takeaways
- Oil prices fell from a five-month high as US President Donald Trump waived sanctions on Russia.
- The move is seen as an attempt to keep oil prices in check ahead of the US midterm elections.
- Russian fuel exports may increase, but market uncertainty remains high.
Oil prices slipped from a five-month high on Monday, with Brent crude futures falling $2.29, or 2.08%, to $107.57 a barrel by 0619 GMT, and US West Texas Intermediate crude dropping $1.95, or 1.92%, to $99.46 a barrel.
The decline followed US President Donald Trump's signing of an executive order waiving key sanctions and tariffs under the Graham Act, which he had signed last month at the urging of lawmakers seeking to pressure Moscow over its war in Ukraine.
However, Secretary of State Marco Rubio stated that the president will use up to 60 days to assess the impact of the sanctions and tariffs on the global economy.
Priyanka Sachdeva, head of market insight at Phillip Nova, commented, 'Trump’s move looks like another desperate attempt to keep oil prices in check ahead of the US midterm elections,' adding that it does little to address the physical supply disruptions in the Strait of Hormuz, where oil tanker attacks continue.
KCM Trade chief analyst Tim Waterer noted that while the US waiver on Russian sanctions could lead to higher Russian fuel exports, the mixed messaging has created uncertainty, and the market is unlikely to fully price in a sustained increase in supply until the details and duration are clearer.
The waiver comes after Trump struck a deal with Russian President Vladimir Putin to export diesel to the United States and other countries, starting at about 2.3 million barrels this month before rising to about 7.6 million barrels monthly.
Ukrainian President Volodymyr Zelenskiy expressed concern over the US actions, stating that they will hurt Ukraine.
Middle East crude exports fell sharply, with Gulf crude flows cut to about 8.5 million barrels per day on a seven-day average last week from more than 20 million bpd the week before, according to analytics firm Kpler.
At least 10 confirmed incidents involving commercial vessels were reported last week, potentially raising the stakes in the Middle East war.
Egypt said it is ready to provide Saudi Arabia with the support it needs to defend its security and stability against Yemen’s Houthis.
DBS expects oil prices to remain rangebound in the $100 to $110 a barrel range going into the US midterms, as Iran and its proxies would ensure oil prices and domestic fuel prices remain the key irritant for US voters.
Trump’s move looks like another desperate attempt to keep oil prices in check ahead of the US midterm elections.
Priyanka Sachdeva, Head of market insight at Phillip Nova
Until the details and duration are clearer, the market is unlikely to fully price in a sustained increase in supply.
Tim Waterer, KCM Trade chief analyst
