WTI Slips as Russia Sanctions Waiver Fuels Supply Optimism

Key Moments

WTI Pulls Back From Recent Highs

Crude Oil prices moved lower on Monday, with the U.S. benchmark West Texas Intermediate (WTI) retreating from the previous session’s one-month peak. WTI dropped below $97.00 after reaching $99.27 on Friday, a decline of 2.3% from that high. Despite the pullback, the contract remains more than 8% higher for the month to date and nearly 40% above its lows in July.

The market shift reflects investor expectations that a waiver on sanctions affecting Russian Oil exports by U.S. President Donald Trump could ease supply constraints. This has tempered some of the concerns over risks tied to ongoing tensions in the Middle East.

Sanctions Waiver on Russian Oil Stirs Political Backlash

Trump signed an executive order on Friday granting a waiver on sanctions targeting Russian Oil shipments, at a time when frictions with Ukrainian President Volodymyr Zelensky are increasing. The move has triggered broad criticism within the United States, including from some of the president’s closest allies.

The backlash led U.S. Secretary of State Marco Rubio to request additional time on Saturday to assess the situation. Comments from Trump over the weekend did little to resolve the uncertainty. Speaking to reporters in Florida, he stated: “A lot of you don’t know what my decision is yet, but we’ll figure ​it out, and you’ll figure it out,” leaving markets to grapple with a lack of clarity on the administration’s ultimate stance.

Rising Security Risks in the Strait of Hormuz

At the same time, the security backdrop in the Strait of Hormuz has worsened. According to the top maritime official at the United Nations (UN), attacks on ships attempting to pass through the strategic chokepoint have intensified, with reports indicating that 24 vessels have been attacked over the past two weeks.

Iran’s Islamic Revolutionary Guard Corps (IRGC) said earlier on Monday that an Oil tanker “violating regulations” caught fire after striking a sea mine while transiting the vital Hormuz route. These developments underline persistent physical supply risks despite the prospect of additional Russian barrels entering the market.

Freight and Insurance Costs Add Support to Oil

In response to the heightened risk environment, freight rates for supertankers have surged to record levels, while insurers have increased premiums for voyages through the area. The combination of higher transportation and insurance costs has provided underlying support to benchmark crude prices, helping to prevent a steeper slide in WTI.

Given these factors, the recent easing in WTI is expected to face limits, with elevated geopolitical risk and higher shipping-related costs likely to cushion prices over the near term.

Market Snapshot for WTI