Global crude prices slid sharply early Monday morning as U.S. President Donald Trump signed an executive order exempting Russia from major sanctions and tariffs, easing immediate supply fears following a nearly 5% rally the previous week driven by mounting Middle East disruptions.
Executive Action Overrides Sanctions and Tariffs
Global markets adjusted positions ahead of an anticipated surge in energy supply after the White House shifted course on Russian trade. President Trump signed an executive order on Friday evening suspending numerous sanctions against Russia just days before they were set to take effect. The administration also waived proposed tariffs for nations importing Russian petroleum, a move the president defended as serving national interests.
Brent crude futures fell 2.29 USD, or 2.08%, to 107.57 USD per barrel, retreating from a high set on May 19. Meanwhile, U.S. West Texas Intermediate dropped 1.95 USD, or 1.92%, to 99.46 USD per barrel, pulling back from its highest close since September 17.
The presidential directive bypassed key enforcement measures under the Graham law, a statute enacted the previous month following pressure from lawmakers seeking to penalize Moscow for the war in Ukraine. Marco Rubio stated that the administration will take up to 60 days to evaluate the broader economic impact of these waivers.
Political Pushback and the Diesel Supply Agreement
The policy shift triggered immediate bipartisan criticism from U.S. lawmakers. President Trump faces mounting political pressure over persistent high fuel costs that threaten the Republican Party’s prospects in the upcoming midterm elections.
Priyanka Sachdeva, head of market analysis at Phillip Nova, described the decision as a desperate attempt to contain oil prices ahead of the midterms, noting the step does little to resolve physical supply bottlenecks in the Strait of Hormuz. Tim Waterer, chief market analyst at KCM Trade, cautioned that while the exemption could eventually boost Russian fuel exports, ongoing messaging ambiguity leaves investors uncertain.
The executive order follows a bilateral supply arrangement brokered between Washington and Moscow. Under the terms, Russia is set to export roughly 2.3 million barrels of diesel to the United States and international markets this month, with volumes scaling up to 7.6 million barrels monthly.
Volodymyr Zelenskyy criticized the new Washington-Moscow agreements, warning they harm Ukraine.
Middle East Supply Disruptions Sustain Market Floors
| Energy Benchmark | Price Movement | Trading Level |
|---|---|---|
| Brent Crude Futures | Down 2.08% (-2.29 USD) | 107.57 USD per barrel |
| West Texas Intermediate | Down 1.92% (-1.95 USD) | 99.46 USD per barrel |
Despite the downward pressure from prospective Russian supply increases, persistent geopolitical conflict in the Middle East prevented a deeper market sell-off. Commercial shipping traffic through the Persian Gulf dropped significantly last week amid verified attacks on commercial vessels.
Data from energy analytics firm Kpler showed that Gulf crude flows plunged to roughly 8.5 million barrels per day last week, down sharply from over 20 million barrels daily during the preceding period, following at least 10 confirmed incidents involving commercial watercraft.
Simultaneously, ongoing hostilities between Saudi Arabia and Yemen’s Iran-backed Houthi movement continue to threaten regional production facilities. Egyptian authorities announced readiness to provide security support to Riyadh, while Washington and Tehran remained locked in strategic friction over navigation rights through the Strait of Hormuz.
