Oil fell for the fourth straight session as Russia weighed concessions to US President Donald Trump that may include an air truce with Ukraine.
West Texas Intermediate crude slid 1.7% to settle near $65 a barrel, adding to a declines over the previous three sessions. Bloomberg reported that the Kremlin is weighing options, including a pause on air strikes, to try to fend off Trump’s threat of secondary sanctions. Crude bounced from intraday lows after the Financial Times reported that Trump is considering blacklisting Russia’s so-called “shadow fleet” of oil tankers if Putin doesn’t agree to a ceasefire by Friday.
The developments come just days ahead of the Aug. 8 deadline for Russia to reach a truce with Ukraine. US Special Envoy Steve Witkoff is expected to visit the nation this week.
“Trump’s sanctions against Russia are mostly noise, as the only thing that will impact flows against a geographically large, top three oil producer with heavy economic links to India and China is a physical blockade,” said Joe DeLaura, global energy strategist at Rabobank.
Trump earlier said he would raise tariffs on India substantially, accusing the country of helping to prolong Russia’s war against Ukraine by purchasing Moscow’s crude. New Delhi slammed the move as unjustified.
Oil has been on a round trip, rising a few dollars to trade around $70 and then falling back, as traders try to gauge whether Trump will follow through on his threats to punish Russian oil buyers. Crude prices have held up in recent months in part because inventory buildups haven’t appeared near vital pricing points and instead have been concentrated on China.
“It’s pretty hard to predict what’s going to happen between Russian sanctions, Iranian sanctions, Chinese storage, and then the underlying fundamentals of the oil markets,” BP Plc Chief Executive Officer Murray Auchincloss said in a Bloomberg Television interview. “Those are the things that’ll drive oil market prices moving forward.”
Trend-following commodity traders known as CTAs may be contributing to the slide, selling as much as 66% of their maximum size as prices drop, said Daniel Ghali, a commodity strategist at TD Securities.
“In nearly every scenario for prices, CTAs will notably sell their WTI and Brent crude longs over the course of this week,” Ghali said.
India has emerged as the biggest buyer of Russian seaborne exports of crude following Russia’s invasion of Ukraine in 2022, soaking up discounted barrels shunned by western nations and ramping up purchases from almost zero to about one-third of imports. China is also a major taker of Moscow’s oil.
The Organization of the Petroleum Exporting Countries and its allies announced another major output hike just days ago, fully completing the return of one layer of supply cuts. The group will now have to decide whether to return more barrels in the coming months, despite forecasts of oversupply into the end of the year.
Meanwhile, Diamondback Energy Inc., the largest independent Permian Basin oil driller, warned of an influx of crude supplies to markets in the coming months and said it’s cutting back on capital spending.
Against that backdrop, both BP and Saudi Aramco said Tuesday that oil demand is holding up. Aramco CEO Amin Nasser said US tariffs are having a limited impact on demand, while consumption is being supported by gasoline and jet fuel use in the US and China.
Oil Prices
WTI for September delivery dropped 1.7% to $65.16 a barrel.
Brent for October settlement dropped 1.6% to $67.64 a barrel.
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