Oil prices declined on Monday after US President Donald Trump announced exemptions from sanctions and proposed tariffs affecting Russian energy transactions, prompting investors to reassess the outlook for international crude supplies.
Brent futures fell 2.06% to $107.60 per barrel at 02:00 ET (06:00 GMT), while US West Texas Intermediate (WTI) futures declined 1.6% to $99.80 per barrel.
The losses followed an increase of almost 5% in crude prices during the previous week, when disruptions to oil shipments from the Middle East had supported the market.
Although economic data from China indicated stronger-than-expected growth and increased refinery activity, the figures provided limited support to oil prices during Monday’s trading.
US Suspends Russian Sanctions Ahead of Implementation
Trump issued an executive order on Friday evening suspending numerous sanctions against Russia shortly before they were due to take effect.
The administration also waived proposed tariffs on countries purchasing Russian oil.
The president said the decision was in the national interest of the United States.
The announcement followed an agreement signed the previous week for US imports of Russian diesel.
Trump had also attributed rising global fuel prices partly to Ukrainian attacks on Russian energy facilities.
In a subsequent social media post, the president said he was pursuing negotiations aimed at ending the conflict between Russia and Ukraine and did not want measures that would “drive… Russia away from the bargaining table.”
Trump also renewed his criticism of Ukrainian President Volodymyr Zelensky.
Ukraine indicated late last week that it intended to continue attacks on Russian infrastructure and expressed dissatisfaction with additional agreements between Washington and Moscow.
Political Response Reflects Disagreement Over Energy Policy
The sanctions waiver prompted criticism from European officials and members of both the Republican and Democratic parties in the United States.
The decision comes as the Trump administration faces elevated domestic fuel prices ahead of the US midterm elections.
Higher petrol and diesel costs have increased household and business expenditure, making energy prices an economic and political consideration.
Critics of the administration have argued that US military operations against Iran contributed significantly to the disruption of global oil supplies.
The conflict has affected shipping through the Middle East, particularly routes associated with the Strait of Hormuz.
The suspension of restrictions on Russian energy transactions has therefore raised questions about how additional crude availability could affect international prices while regional supply disruptions continue.
ANZ Identifies Refined Fuel Distribution as a Market Constraint
Analysts at ANZ said the ability to transport and distribute refined petroleum products had become an increasingly important consideration for global oil demand.
“The key question is no longer whether the global economy can generate fuel demand, but whether the global supply chain can efficiently deliver refined products to end-users,” the analysts wrote.
The bank noted that global oil consumption had remained relatively resilient despite substantial price increases in recent months.
According to ANZ, constraints affecting the transportation and delivery of refined products may be limiting consumption independently of underlying economic growth.
“The largest upside risk to oil demand in 2027 is therefore not necessarily stronger GDP growth but the easing of constraints that are currently suppressing consumption,” the analysts added.
The assessment suggests that improvements in distribution capacity could influence future demand even without a corresponding increase in the rate of global economic expansion.
Tehran Reiterates Proposal to Reopen Strait of Hormuz
Iranian Foreign Minister Abbas Araqchi said on Sunday that Tehran’s proposal to reopen the Strait of Hormuz within seven days remained available to Washington.
“The way to reopening the Strait of Hormuz is obvious,” Araqchi told Iranian media, criticising the United States for not accepting the offer.
The closure of the waterway has disrupted approximately 20% of global oil supplies.
Asian importing countries have been particularly affected because of their reliance on shipments passing through the strait.
Shipping volumes briefly improved in September before renewed attacks on vessels disrupted traffic again.
The Strait of Hormuz remains a major transportation route for crude oil and petroleum products exported from the Middle East.
Its reopening would be relevant to the availability and delivery of energy supplies, although the timing and conditions of any agreement remain uncertain.
Middle East Security Risks Continue to Affect Oil Transportation
Additional tensions in the region have contributed to uncertainty surrounding oil exports.
Saudi Arabia and Yemen’s Iran-backed Houthi movement have continued to clash, adding to concerns about energy infrastructure and maritime security.
Shipping data indicated that oil flows from the Persian Gulf improved during the second week of October.
However, the recovery remained vulnerable to further disruption.
Market participants are monitoring vessel movements and security developments to assess whether improvements in regional exports can continue.
Chinese Growth and Refinery Activity Provide Demand Indicators
China’s latest economic figures offered some support to expectations for global oil consumption.
The world’s largest crude importer reported third-quarter economic growth that exceeded market forecasts.
Separate data showed that Chinese refinery throughput increased for a third consecutive month in September.
The increase was driven mainly by higher exports of refined petroleum products.
The figures indicate continued activity in China’s refining industry, although the positive demand signals were insufficient to offset the effects of changing international supply expectations on Monday.
Crude Markets Remain Focused on Sanctions and Shipping Conditions
Oil futures moved lower as the market considered the possibility of additional Russian crude remaining available to international buyers.
Brent traded at $107.60 per barrel and WTI at $99.80, reversing part of the previous week’s increases.
The US sanctions decision has altered expectations for Russian energy exports, while continuing disruptions around the Strait of Hormuz remain an important supply consideration.
Future developments in diplomatic negotiations, regional security and the movement of oil shipments will continue to influence the outlook for crude and refined petroleum markets.
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