Oil backs off three-week high on Russian supply risks

Oil prices fell by more than 1% on Tuesday after jumping about 2% in the previous session, as traders monitored developments in the Ukraine war and the potential disruption of Russian fuel supplies.

Brent crude dropped 1.08 dollars, or 1.57%, to 67.72 dollars a barrel by 10:40 GMT, after touching its highest level since early August in the previous session. West Texas Intermediate (WTI) crude fell 1.13 dollars, or about 1.74%, to 63.67 dollars.

Giovanni Staunovo, analyst at UBS, said: “The slight decline today is due to risk-off sentiment, with equity markets trading lower. Geopolitical factors remain under watch, particularly what Trump might do if no meeting is held between Russia and Ukraine.”

Monday’s oil rally was driven mainly by supply risks after Ukrainian strikes targeted Russian energy infrastructure, along with the possibility of new US sanctions on Russian oil.

Ukraine’s attacks, launched in response to Russia’s advances in the conflict and its bombing of Ukrainian gas and energy facilities, disrupted Russian refining and export operations and caused gasoline shortages in some regions inside Russia.

At the same time, US President Donald Trump renewed his threat to impose sanctions on Russia if no progress is made toward a peace deal within the next two weeks.

However, sources told Reuters that US and Russian officials discussed several energy deals on the sidelines of this month’s peace negotiations.

Thomas Varga, analyst at PVM Oil Associates, said: “Given the high level of uncertainty in the oil market due to the Ukraine conflict and the trade war, investors will remain reluctant to commit to any direction for long.” He added that Brent prices may remain confined within a trading range of 65 to 74 dollars in the medium term.

Ole Hansen, commodity strategist at Saxo Bank, noted that looming US tariffs against India for continuing to buy Russian oil represent another factor watched by the market. India is the third-largest buyer of Russian crude.

Indian exports could face US tariffs of up to 50% – among the highest duties imposed by Washington.