Onome Amuge
Oil prices extended losses on Tuesday, slipping nearly 2 per cent as traders assessed the impact of fresh US sanctions on Russia’s biggest oil producers and the prospect of higher supply from OPEC and its allies.
Brent crude, the international benchmark, fell $1.22, or 1.9 per cent, to settle at $64.40 a barrel, while US West Texas Intermediate dropped $1.16 to $60.15. Both benchmarks have now fallen for three consecutive sessions, giving back part of last week’s strong gains.
The retreat follows a sharp rally that had pushed Brent and WTI to their biggest weekly rise since June after President Donald Trump’s administration imposed Ukraine-related sanctions on Lukoil and Rosneft. The two companies together account for roughly 2 per cent of global crude output.
Germany’s economy minister said on Tuesday that the US government had granted written assurances exempting Rosneft’s German business from the measures, as the assets are no longer under Russian control. Analysts said the move signalled that Washington could take a flexible approach to enforcement.
“Trump giving Germany this waiver gives the impression there could be more wiggle room on these sanctions. That’s taking away some of the immediate fears of a sharp supply squeeze — we saw clear risk-off positioning today,” said Phil Flynn, senior analyst at Price Futures Group.
The International Energy Agency’s executive director Fatih Birol said the sanctions’ impact on global supply would likely be limited, citing available spare capacity among producing nations.
Lukoil, Russia’s second-largest oil producer, announced on Monday plans to divest its international assets; the most significant step yet by a Russian energy company since Western sanctions intensified over Moscow’s invasion of Ukraine in 2022.
In Asia, Indian refiners have paused new orders of Russian crude as they await government guidance and clarity from suppliers, sources told Reuters, underscoring growing caution among Moscow’s key export markets.
Meanwhile, OPEC+ (which includes OPEC members and allies such as Russia) is leaning towards another modest output increase in December, according to four sources familiar with internal discussions. The group began unwinding production cuts earlier this year after several years of restraint aimed at stabilising prices.
“This raises the question of how much spare capacity OPEC+ really has left,” said Flynn.
Amin Nasser, chief executive of Saudi Aramco, said oil demand remained robust even before sanctions hit Rosneft and Lukoil, with Chinese consumption described as “healthy.” Analysts said additional OPEC+ supply could help offset any disruption to Russian barrels.
Elsewhere, attention turned to geopolitical developments as traders looked ahead to a meeting between Trump and Chinese President Xi Jinping later this week in South Korea, amid tentative signs of renewed efforts to ease trade tensions between the world’s two largest oil consumers.
In a phone call on Monday, Chinese foreign minister Wang Yi told US secretary of state Marco Rubio that Beijing hoped Washington would meet it halfway to create conditions for “high-level interactions,” according to a statement from China’s foreign ministry.
On the data front, private industry figures from the American Petroleum Institute showed a larger-than-expected drawdown in US inventories. Crude stocks fell by 4.02 million barrels in the week ending October 24, while gasoline and distillate inventories declined by 6.35 million and 4.36 million barrels, respectively.
Despite the tighter US stock data, analysts said market sentiment remained cautious amid competing signals from sanctions, supply prospects, and policy developments.
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