Oil futures fell Monday, pulling back from Friday's gains after President Trump waived newly imposed sanctions on Russia, while persistent Middle East supply risks kept prices afloat.
Brent crude for December delivery settled down 0.3% at $109.55 a barrel and West Texas Intermediate for December fell 0.5% to $98.54 a barrel. The WTI November contract, which expires Tuesday, rose 2.2% on thin volume to $103.66 a barrel.
President Trump signed an executive order Friday waiving some sanctions and tariffs under a new law targeting Russia, potentially easing restrictions on Russian energy trade. The waiver doesn't affect earlier sanctions.
"The big question is: will it work?" Peter Cardillo, chief market economist at Spartan Capital, said in a note. The waiver could provide temporary relief, "but with the war in Iran and renewed Ukrainian attacks on Russian oil refineries, oil prices are unlikely to decline significantly."
Concerns over Russian supplies persisted after Ukrainian drones struck an oil terminal in St. Petersburg on Sunday, The Wall Street Journal reported.
The waiver and the release of Russian diesel under a previous agreement between Trump and Russian President Vladimir Putin puts "a few more barrels back on a market that has been running on fumes," Price Futures Group senior market analyst Phil Flynn said in a note.
But "these volumes are small compared with the global shortfall, Russian refining capacity is still damaged, both sides continue to target energy infrastructure, and inventories -- especially U.S. distillates -- remain historically low," he said.
The decline could reflect a technical correction following Friday's gains, but further downside could be limited by geopolitical tensions and the risk of additional supply disruptions, analysts at ANZ Research said.
Middle East tensions remain high. Iran has been providing Yemen's Houthi militia with intelligence and targeting assistance for attacks on Saudi Arabia, The Wall Street Journal reported. The group also controls Yemen's coastline along the Bab al-Mandeb Strait, a key route for Saudi oil exports, according to the report.
Shipping risks persisted, with U.K. Maritime Trade Operations reporting an attack on a tugboat near the United Arab Emirates on Sunday, following attacks on two tankers off Saudi Arabia on Friday.
The disruptions continue to constrain oil flows through the Strait of Hormuz. Confirmed shipments averaged 10.17 million barrels a day over the seven days through Saturday, around 41% below prewar levels, according to Kpler. Including shipments from Gulf of Oman terminals and the Red Sea, flows averaged 19.04 million barrels a day, about 19% below prewar levels, the data showed.
Despite recovering Middle East crude exports, supplies from affected Gulf producers and Russia remain 5.5 million barrels a day below year-earlier levels, according to Morgan Stanley. The bank said record tanker freight costs, low inventories and geopolitical risks continue to support oil prices, raising its fourth-quarter dated Brent forecast to $105 a barrel.
Analysts at ING said a sustained recovery in shipments through the Strait of Hormuz would require greater confidence in regional stability, with a U.S.-Iran agreement needed to reduce the geopolitical risk premium.
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