Oil prices retreat from 5-month high after Trump eases Russian fuel sanctions

Global oil prices tumbled briefly on Monday from their five-month high at the end of last week after US President Donald Trump signed an executive order waiving key sanctions and tariffs under the newly enacted Lindsey Graham Act. Brent Crude is trading at $108.63/barrel, falling from the peak of $110 hit on Friday, while US West Texas Intermediate (WTI) is at $101.53 per barrel, up from an intraday low of $99.24 per barrel.

US Secretary of State Marco Rubio noted that the administration is using a 60-day window to evaluate the macroeconomic impact of the Russian fuel waiver. This short timeline injects major uncertainty into the market, as algorithms are struggling to price in whether this extra supply is permanent or temporary.

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Despite Trump's relaxation, the oil market remains stubbornly tight. While the announcement initially triggered profit-taking, causing Brent to slide over 2% to $107.57 and WTI to slip below $100, the drop was incredibly short-lived. Investors realised that despite the US sanctions waiver, long-term structural scarcity has not gone away. They rushed in to buy the dip, so the price did not tumble much. Further, just hours before the waiver announcement, Ukrainian drone strikes hit an oil terminal in St. Petersburg, Russia. Ukrainian President Volodymyr Zelensky and US President Donald Trump continued their verbal spat, reflecting a strained relationship between the allies.

"Ongoing strikes on vessels crossing the Strait of Hormuz and flows remaining below pre-conflict levels continue to provide ​support," UBS analyst Giovanni Staunovo, as reported by Reuters.

According to Washington, shipping flows have recovered to 80%–90% of pre-war levels, but the area around the Strait of Hormuz and Strait of Bab al-Mandeb remains volatile. Repeated strikes have pushed tanker chartering costs and insurance premiums to exorbitant highs, ensuring physical crude stays expensive even when it moves.