Markets
Brent Fell Below $108 After Trump Waived the Russia Oil Sanctions That Were Due to Start on Sunday
Brent crude fell 1.7% to about $108 a barrel on October 19 after President Trump signed an order on Friday waiving the sanctions and tariffs on buyers of Russian oil under the Graham Act, which were due to take effect on October 18, as part of an agreement to let Russian diesel into the US. Brent had settled at $109.86 on Friday, the highest since May; Secretary of State Rubio said the president would take up to 60 days to assess the effect.
Oil opened the week lower for a reason that had nothing to do with demand. Brent crude, which settled at $109.86 a barrel on Friday after a $3.94 gain, its highest close since May, fell $1.94 to $107.92 by 02:27 GMT on Monday, October 19, down 1.77%, and traded near $108 through the Asian session. West Texas Intermediate, which settled above $101 on Friday for the first time since September, was around $100 in early trading. The move followed an executive order President Trump signed on Friday waiving the Russia-related provisions of the sanctions law sponsored by Senator Lindsey Graham, two days before they were to take effect.
The law required tariffs of up to 500% on Russian goods and of up to 100% on the five largest importers of Russian crude oil and natural gas, with the tariffs on buyers scheduled to begin on Sunday, October 18; China and India were the countries most likely to be hit. The president may waive the measures by certifying to Congress that doing so serves the national interest, which he did, and the order says the waiver stands until the White House determines that further action is appropriate. The waiver was tied to an agreement under which Russian diesel exports will be allowed into the United States, where diesel prices have risen with crude; it was the second time in two weeks that the administration eased Russia measures with fuel prices as the stated reason.
The reaction in Washington was unusually bipartisan. Senator Thom Tillis called the decision beyond irresponsible, several other Republicans broke with the White House, and Ukraine's President Zelenskyy objected; Kirill Dmitriev, the Russian official who has led economic talks with the US, praised it. Secretary of State Marco Rubio said on Sunday that the president would use up to 60 days to assess the economic impact of the sanctions and tariffs on the global economy before deciding how to proceed, which leaves the measures suspended through the middle of December at least.
The supply effect is about product more than crude. Russian diesel reaching US ports relieves the tightest part of the fuel market, and the removal of a 100% tariff threat on China and India means their refiners keep buying discounted Russian barrels rather than bidding for Middle Eastern cargoes that are already scarce: attacks on commercial vessels in the Gulf have cut crude flows from the region sharply, which is why Brent was above $109 on Friday. Monday's decline unwinds half of Friday's gain, no more. In Australia, Woodside Energy suspended pre-commissioning at its Scarborough gas project after Greenpeace activists boarded the offshore platform, a reminder of how little spare capacity the market has to absorb interruptions.
For the inflation debate the timing is awkward. Gasoline stations were 71% of September's retail sales increase and energy was the main reason import prices rose 8.1% in a year; the Fed meets on October 28 with markets pricing roughly even odds of another hike. A $2 fall in Brent on a sanctions waiver that can be reversed in 60 days does not change that picture, and the energy sector ETF, which rose last week while technology fell 7.7%, will show on Monday whether investors think it does.