Oil rose after US President Donald Trump said he would move up the deadline for Russia to agree to a truce in Ukraine, reigniting concerns that tensions between Moscow and the West will threaten flows of crude supplies.
West Texas Intermediate climbed by 2.4% to settle at the highest in a week while Brent climbed above $70 a barrel to end the session at the highest level in more than two weeks.
Trump said he would impose a new deadline of 10-12 days for Russian leader Vladimir Putin to reach a truce with Ukraine, after previously threatening Moscow with 100% “secondary tariffs” to create pressure toward a peace deal.
“Until now, traders had largely discounted the likelihood of meaningful follow-through on sanctions, but today’s headlines are prompting a reassessment of potential supply disruptions or increased shipping costs from rerouted trade flows,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group.
The US president’s actions follow a latest round of sanctions by the European Union against Russia, including a lower price cap on the country’s crude and the import of refined products made from Moscow’s oil in third countries. The restrictions won’t come into effect until January, however, a hardening of Trump’s tone on Russia has traders bracing for the prospect of a sooner-than-expected tightening of the European diesel market and rerouted Russian flows.
“If enforced, oil markets cannot ignore the impact of triple-digit tariffs on Russian oil, given the significant scale of Russian exports and limited OPEC spare capacity, potentially leading to a supply shock,” JPMorgan analysts wrote in a note dated July 15.
The move higher in oil prices added to an earlier rally after Trump said the European Union had agreed to buy $750 billion in American energy products.
Trump’s trade policies and threats of retaliation from targeted countries for months have raised concerns about the outlook for energy demand should global economic growth slow, while a decision by OPEC+ to rapidly increase output has put the market on track for oversupply later this year.
A meeting between the OPEC+ committee on Monday concluded with no recommendations on output policy, while the group once again urged members to adhere to oil quotas. Traders and analysts expect the group to hike its quota again.
US and Chinese officials finished the first of two days of trade talks, with neither side speaking to reporters before departing. Earlier, the South China Morning Post reported that the two countries are expected to extend their tariff truce, according to people it didn’t identify.
Oil Prices
WTI for September delivery rose 2.4% to settle at $66.71 a barrel.
Brent for September settlement gained 2.3% to $70.04 a barrel.
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