Oil Prices Edge Lower as Markets Shrug Off EU Sanctions on Russia, But Diesel Concerns Offer Support
Oil prices closed slightly down on Monday as traders downplayed the impact of the European Union’s latest sanctions on Russian oil exports, though worries over diesel supply shortages helped cushion losses.
Brent crude futures dipped 7 cents (0.1%) to settle at $69.21 per barrel, while U.S. West Texas Intermediate (WTI) dropped 14 cents (0.2%) to $67.20 per barrel.
The mild decline followed the EU’s approval on Friday of its 18th sanctions package targeting Russia’s oil industry over the war in Ukraine. The measures also hit India’s Nayara Energy, which exports refined products made from Russian crude.
“The market believes Russian supply will still find its way to buyers in some form. There isn’t much concern right now,” said John Kilduff of Again Capital in New York.
Echoing that sentiment, Kremlin spokesperson Dmitry Peskov said Russia has developed resilience against Western sanctions.
The latest EU measures come on the heels of U.S. President Donald Trump’s threats to sanction countries that continue to buy Russian exports unless a peace agreement is reached within 50 days.
According to ING analysts, the only part of the EU package likely to have a real impact is the ban on importing refined products made from Russian crude in third countries. However, enforcement could be a major challenge due to the complexity of tracking oil flows.
Despite the weak reaction in crude markets, concerns over diesel supplies helped offset some of the downward pressure on prices.
“Later in the day, we saw strength in diesel crack spreads, indicating the market is worried that disruptions in Russian supply could tighten diesel availability,” said Phil Flynn of Price Futures Group.
The premium of low-sulfur gasoil futures over Brent crude climbed to $26.31, up about 3%, marking the highest closing level since February 2024.
“We can shuffle crude barrels around globally, but diesel is harder to replace,” Flynn added.
Meanwhile, Iran, also under sanctions, is set to hold nuclear negotiations with Britain, France, and Germany in Istanbul on Friday, following European warnings that failure to restart talks could trigger renewed sanctions.
In the U.S., Baker Hughes reported the number of active oil rigs fell by two to 422, the lowest since September 2021.
“Oil-focused drilling activity will likely stay muted for the rest of the year,” wrote StoneX analyst Alex Hodes, though he added that current price levels don’t justify a major pullback in investment.
On the trade front, U.S. tariffs on EU imports are set to begin on August 1, though Commerce Secretary Howard Lutnick said on Sunday that he remains hopeful a deal with the EU can be reached in time.
“Tariffs could weigh on both oil demand and broader economic activity,” Kilduff noted.
Looking ahead, oil inventory data could offer some upside if it reflects tighter-than-expected supply, said IG market analyst Tony Sycamore.
