Russia Sanctions And US Tariffs Loom, Yet Crude Prices Barely Move
Oil prices remained broadly unchanged in early trading on Monday, as investors evaluated the potential impact of new sanctions on Russian crude products amid concerns that rising geopolitical tensions and global trade frictions could affect fuel demand.
Around 7:30 AM, Brent crude futures slipped by just 1 cent to trade at $69.27 a barrel, following a modest 0.35 per cent drop in the previous session, reported Reuters. Meanwhile, US West Texas Intermediate (WTI) crude edged up by 10 cents to $67.44 a barrel, recovering slightly after a 0.30 per cent dip on Friday.
On Friday, the European Union approved its 18th sanctions package against Russia in response to the ongoing conflict in Ukraine. This latest round of measures includes restrictions targeting India-based Nayara Energy, which has been exporting refined petroleum products made from Russian crude oil. While the Kremlin has downplayed the impact of Western sanctions, claiming a degree of “immunity,” analysts have expressed doubt about the immediate effectiveness of the new measures.
The lack of significant price reaction suggests the market is not yet convinced of the sanctions' impact, noted ING analysts led by Warren Patterson. However, they added that the inclusion of an EU ban on imports of refined oil products processed from Russian crude in third countries could have broader consequences.
"But clearly, it will be challenging to monitor crude oil inputs into refineries in these countries and, as a result, enforce the ban,” the analysts cautioned.
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Markets Uncertain Amid Trade Tensions, Iran Negotiations
In parallel to the Russian developments, concerns about trade tensions between the US and the European Union are also adding to market caution. With tariffs on EU imports set to come into force from August 1, market watchers remain wary of potential disruptions to economic growth and fuel demand. However, US Commerce Secretary Howard Lutnick expressed optimism on Sunday, saying he was hopeful of securing a deal with European counterparts before the deadline.
On the supply front, Middle Eastern producers are continuing to increase output levels, which may counteract any short-term tightening. Meanwhile, the number of active oil rigs in the US dropped by two last week, bringing the total down to 422 — the lowest figure since September 2021, according to energy services firm Baker Hughes.
In another geopolitical flashpoint, Iran is scheduled to resume nuclear negotiations with Britain, France and Germany in Istanbul on Friday. The talks are aimed at preventing a renewed wave of international sanctions amid stalled diplomacy. Any developments in these discussions could have downstream effects on oil exports from the sanctioned nation.
Market analysts expect oil to trade within a narrow band in the coming days, with IG's Tony Sycamore estimating crude to fluctuate between $64 and $70.
Since the ceasefire between Israel and Iran on June 24 brought an end to a brief 12-day conflict, Brent prices have ranged between $66.34 and $71.53 a barrel, reflecting relative stability but ongoing caution in global energy markets.
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