Oil Slips as U.S. Waives Russia Sanctions, Hormuz Risk Persists

MONTREAL (Oil Monster): Oil prices pulled back Monday from five-month highs as traders weighed the prospect of additional Russian fuel supplies following a U.S. sanctions waiver against a sharp deterioration in crude flows through the Middle East.

Brent crude futures were down $1.34, or 1.22%, at $108.52 per barrel by 1002 GMT after settling Friday at their highest level since May 19. U.S. West Texas Intermediate crude traded at $101.28 per barrel, down 13 cents, after finishing last week at its highest since September 17.

Prices had fallen more sharply earlier in Asian trading as markets reacted to President Donald Trump's decision to waive key new Russia-related sanctions and tariffs under the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026.

Oil Retreats After Reaching Five-Month Highs

Monday's decline followed a strong end to the previous week.

Brent briefly traded above $110 per barrel on Friday for the first time since May as escalating tanker attacks and uncertainty around Middle East supply pushed more geopolitical risk into crude prices.

WTI also closed above $100 as tight fuel markets and shipping disruptions continued to support U.S. crude.

Monday's decline therefore reflected both the Russia-related supply news and profit-taking following the recent rally.

Trump Waives New Russia Sanctions Under Graham Act

Trump signed an executive order on October 16 implementing but immediately waiving many of the sanctions, restrictions and tariffs established by the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026.

The law was signed on September 18 and was designed to increase economic pressure on Russia over its war in Ukraine.

Among other measures, the framework provided for large tariffs on Russian goods and penalties involving major countries purchasing Russian oil and natural gas.

Trump invoked the law's national-interest waiver authority before many of those measures took effect.

Existing Russia Sanctions Have Not All Been Removed

The executive order should not be described as eliminating all U.S. sanctions on Russia.

The White House order specifically states that the waiver does not affect sanctions or other measures imposed under earlier executive orders addressing harmful activities by the Russian government.

The immediate policy change therefore applies primarily to the new sanctions, restrictions and tariffs created under the Graham Act.

Administration Begins 60-Day Russia Sanctions Review

Secretary of State Marco Rubio said the administration will use up to 60 days to evaluate the economic consequences of the sanctions and tariffs.

Trump has also indicated that the current waiver should not necessarily be treated as the administration's final long-term position.

The White House order says the waivers remain in effect until the president or designated senior officials determine that further action is appropriate.

That leaves significant policy uncertainty surrounding Russian oil, fuel and international buyers.

Russian Diesel Deal Adds Supply to Tight Fuel Market

The sanctions decision follows a separate agreement between Trump and Russian President Vladimir Putin covering additional Russian diesel exports.

The arrangement begins with roughly 2.3 million barrels of diesel this month before volumes potentially rise toward approximately 7.6 million barrels per month.

The additional product is intended to relieve extraordinarily tight diesel markets in the United States and elsewhere.

ALSO READ: Oil Falls as Russian Diesel Deal Eases Supply Fears

Russia Could Eventually Supply Around 250,000 Bpd of Diesel

A monthly volume of 7.6 million barrels works out to approximately 253,000 barrels per day when averaged over a 30-day month.

That would provide meaningful incremental supply to a diesel market that has been hit by lost Russian and Middle Eastern refinery production.

However, the volume remains small compared with the scale of crude and petroleum-product disruption occurring in the Middle East.

IEA Is Also Releasing Emergency Diesel

Governments are simultaneously attempting to increase diesel availability through strategic stock releases.

The International Energy Agency has agreed to accelerate more than 20 million barrels of diesel into the market as part of the emergency reserve program launched in March.

The combination of Russian supply and emergency inventories could temporarily ease product-market pressure.

Neither measure, however, replaces sustained refinery output lost during the Middle East and Russia-Ukraine conflicts.

ALSO READ: IEA Fast-Tracks More Than 20M Barrels of Diesel

Russian Supply News Caps Oil Price Rally

KCM Trade Chief Analyst Tim Waterer said the softer sanctions stance and profit-taking after the recent oil rally were limiting further gains.

However, traders remain cautious about assuming that Russian supply will increase on a sustained basis because the duration and full scope of U.S. policy remain unclear.

The 60-day review adds another layer of uncertainty over how long the waiver could remain in place.

Hormuz Disruption Remains the Larger Immediate Supply Risk

The Middle East continues to provide the strongest counterweight to the Russia-related bearish pressure.

Kpler said Gulf crude flows fell to a seven-day average of approximately 8.5 million bpd last week.

That compares with more than 20 million bpd during the previous week.

Using 20 million bpd as a conservative starting point, the decline is at least 57.5%.

At Least 10 Commercial Vessel Incidents Reported

Kpler counted at least 10 confirmed incidents involving commercial vessels during the week.

Continued attacks have reduced confidence that the recent recovery in Gulf exports can be sustained.

Shipowners must consider vessel safety, insurance availability, crew risk and rapidly changing transportation costs when deciding whether to enter the region.

Tanker Explosion Adds to Strait of Hormuz Risk

The security situation deteriorated further over the weekend.

An oil tanker caught fire and exploded after striking what Iran's Islamic Revolutionary Guard Corps described as a naval mine in the southern Strait of Hormuz on Sunday, according to Iranian media cited by Reuters.

The incident added to concerns that commercial tanker traffic could remain well below normal even when sufficient crude is available for export.

Oil Supply and Deliverable Oil Are Becoming Different Things

The crisis continues to demonstrate the difference between physical production and barrels that can actually reach international buyers.

Middle Eastern producers may have crude available at fields and storage terminals, but tanker attacks, insurance costs and limited vessel availability can prevent those barrels from moving efficiently.

That logistics constraint is one reason Brent remains above $100 even as governments pursue additional Russian supply and emergency stock releases.

ALSO READ: OPEC+ Says Oil Shipping Costs Top One-Third of Cargo Value

Washington Is Also Considering Shadow-Fleet Relief

The administration is separately considering whether some sanctioned shadow-fleet tankers could be authorized to transport otherwise legal crude oil and petroleum products.

The proposal is intended to increase usable vessel capacity and reduce record freight rates.

Any such arrangement would require U.S. Treasury authorization and would not automatically legalize sanctioned Russian or Iranian cargoes.

ALSO READ: U.S. Weighs Shadow Fleet Relief to Cut Oil Freight Costs

Gulf Shipping Collapse Overshadows Added Russian Diesel

The contrast in scale is significant.

Russian diesel supply could eventually reach roughly 253,000 bpd based on the announced monthly volume.

Gulf crude flows, meanwhile, fell by more than 11.5 million bpd week over week based on Kpler's reported averages.

Those figures measure different petroleum products and should not be directly netted against one another.

They nevertheless demonstrate why Russian supply relief is currently more effective at limiting oil-price upside than eliminating the fundamental Middle East supply threat.

Iranian Crude Remains Effectively Off the Market

The wider regional shortage also includes Iran itself.

Vortexa recently reported that Iranian seaborne crude exports had fallen to zero, with tens of millions of barrels trapped west of the Strait of Hormuz.

Russia has increasingly filled some of the crude requirements previously met by Iran, particularly for Chinese buyers.

ALSO READ: U.S. Blockade Cuts Iranian Crude Exports to Zero

Egypt Signals Support for Saudi Arabia

Regional security risks also increased after Egypt said it was prepared to provide Saudi Arabia with support needed to defend its security and stability against Yemen's Iran-aligned Houthis.

The statement followed escalating attacks affecting Saudi targets and infrastructure.

Any widening of that conflict could add further risk to oil production, pipelines, export terminals and Red Sea shipping.

Middle East Conflict Keeps a Large Risk Premium in Brent

The combination of tanker attacks, constrained Gulf exports and continued military escalation means crude prices retain a substantial geopolitical premium.

Additional Russian diesel supply may ease product-market pressure, but traders remain sensitive to any development that could further restrict the Strait of Hormuz.

That helps explain why Monday's early oil losses narrowed later in the session.

Oil Prices Could Remain Volatile During U.S. Policy Review

Markets now face uncertainty on two fronts.

The first is physical: how much crude can safely leave the Gulf in coming days?

The second is regulatory: how much Russian energy will U.S. policy permit to reach international markets after the administration completes its review?

Either development could materially change near-term oil and diesel balances.

What Happens Next

Oil traders will be watching tanker movements through the Strait of Hormuz, particularly whether Gulf flows recover from last week's roughly 8.5-million-bpd seven-day average.

Markets will also monitor whether Russia delivers the announced diesel volumes and whether Washington provides additional detail on the scope and duration of the Graham Act waivers.

The U.S. administration's 60-day review could become a major oil-market catalyst if it results in renewed sanctions, extended waivers or broader access to Russian energy supply.

For now, additional Russian fuel is easing some immediate supply pressure, but the far larger disruption remains the ability to move Gulf oil safely through international shipping routes.

Frequently Asked Questions

Why did oil prices fall on October 19?
Prices retreated from five-month highs as markets reacted to U.S. waivers of new Russia-related sanctions and tariffs, the prospect of additional Russian diesel supply and profit-taking after the previous week's rally.

Did the United States remove all sanctions on Russia?
No. The executive order waives many measures created by the new Graham Act but explicitly preserves sanctions imposed under earlier Russia-related executive orders.

How much diesel has Russia agreed to supply?
The announced agreement begins with roughly 2.3 million barrels this month and could rise toward approximately 7.6 million barrels per month.

How much oil is currently moving from the Gulf?
Kpler said Gulf crude flows averaged around 8.5 million bpd over seven days last week, down from more than 20 million bpd during the previous week.

Why is Brent still above $100 if Russian fuel supply is increasing?
The scale of Middle East supply and shipping disruption remains much larger, while tanker attacks, high freight costs and constrained Hormuz traffic continue to support prices.

How long will the U.S. Russia sanctions waiver last?
The executive order does not establish a fixed expiry date. Rubio said the administration will use up to 60 days to assess the economic impact, while the order allows the president or designated officials to determine when further action is appropriate.

Explore More on OilMonster

Oil Falls as Russian Diesel Deal Eases Supply Fears

U.S. Weighs Shadow Fleet Relief to Cut Oil Freight Costs

OPEC+ Says Oil Shipping Costs Top One-Third of Cargo Value

U.S. Blockade Cuts Iranian Crude Exports to Zero

IEA Fast-Tracks More Than 20M Barrels of Diesel

Source: Reuters; The White House.

Courtesy: www.reuters.com