Oil Holds Decline With Trade Talks, Russia Energy Curbs In Focus
Oil prices held steady on Monday, with the focus shifting from the first weekly decline in three months to the latest developments in US-EU trade talks and Russia’s energy exports.
Brent crude, the global benchmark, was little changed at around $69 a barrel, while West Texas Intermediate (WTI) held above $67 as traders weighed the implications of a potential no-deal scenario between the United States and the European Union.
The EU is set to meet as early as this week to formulate a plan for measures to respond to a possible no-deal scenario, with a focus on curbing Russian energy exports. The bloc has already agreed to a lower price cap for Moscow’s crude as part of a package of sanctions against Russia, which includes curbs on fuels made from Russian petroleum, additional banking limitations, and a ban on a large oil refinery in India.
The UK has joined the EU efforts to curb Russian energy exports, with the aim of reducing the country’s ability to finance its military activities in Ukraine. However, the effectiveness of these measures remains uncertain, with some analysts predicting that Russia will find ways to circumvent the sanctions.
The price of oil has trended higher since early May, driven by a combination of factors including the ongoing trade tensions between the US and China, OPEC+ supply curbs, and the Middle East tensions. Despite this, Brent is still down around 7% this year, with prices jolted by the US-China trade war and OPEC+ relaxing its supply curbs.
Meanwhile, the price of diesel in Europe, a gauge for the profitability of producing the fuel, was near the highest since March 2024, while its prompt time spread rallied on Friday, widening its bullish backwardation structure. This suggests that investors are betting on a further increase in diesel prices, driven by concerns over global supply and demand imbalances.
Oil prices:
- Brent for September settlement rose 0.1% to $69.33 a barrel at 7:47 a.m. in Singapore.
- WTI for August delivery, which expires Tuesday, was stable near $67.36 a barrel.
- The more active September contract added 0.1% to $66.13 a barrel.
In conclusion, oil prices are holding steady as investors weigh the implications of a potential no-deal scenario between the US and EU, as well as the latest developments in Russia’s energy exports. While the price of oil has trended higher since early May, it remains uncertain whether these gains will be sustained in the long term.
