DTN Oil Update
Oil Rises Ahead of FOMC as EU Weighs Secondary Sanctions
VIENNA (DTN) -- Oil prices rose Tuesday morning after the European Union postponed a vote on the 19th sanctions package against Russia in order to more closely coordinate sanctions with G-7 partners. The reworked package may include secondary sanctions on buyers of Russian oil, a key U.S. demand and condition for additional U.S. sanctions.
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NYMEX-traded WTI for October delivery rose $0.25 to trade near $62.94 bbl, and ICE Brent for November delivery gained $0.12 to $67.11 bbl.
October RBOB gasoline futures edged up $0.0087 to $1.9941 gallon, and the front-month ULSD contract was up $0.0235 to $2.3135 gallon.
The U.S. Dollar Index was little changed, up 0.079 points to 97.690.
U.S. President Trump over the weekend said he was ready to institute direct sanctions on Russia, as well as additional tariffs on imports from major buyers of Russian oil like India and China, conditional on NATO and EU countries ceasing all oil purchases from Russia. While Russian flows to Europe have plummeted since the invasion of Ukraine, two landlocked NATO and EU countries, Slovakia and Hungary, are currently exempt from the EU embargo on Russian oil imports, given their limited supply alternatives. Under their current agreement, EU countries have until 2028 to completely faze out Russian energy purchases.
According to Bloomberg, EU officials are considering sanctions on Indian and Chinese companies involved in Russian oil trade in order to meet U.S. demands but may refrain from broad tariff measures given the economic bloc's reliance on their export markets. The report made no mention of an accelerated faze-out of imports of Russian oil.
Expectations of U.S. interest rate cuts ahead of a two-day FOMC meeting also helped support prices. According to CME Group's FedWatch Tool, 96% of investors are expecting a 25-basis-point cut Wednesday, with the remaining 4% betting on a 50-point cut. Lower borrowing costs are set to boost oil demand as the global market faces a looming crude oil overhang in the months ahead.