Oil Price Today (October 19): Crude oil dips 2% to $108 after hitting its highest levels since May. Here’s why

Oil prices eased on Monday after hitting the highest levels seen since May as US President Donald Trump waived sanctions and tariffs on Russia, a move that could pave the way for higher Russian fuel exports.

Crude oil price on October 19

Brent crude futures dropped $1.80, or 1.64%, to $108.06 a barrel after settling at their highest level since May 19 on Friday. US West Texas Intermediate crude declined 53 cents, or 0.52%, to $100.88 a barrel.

Trump signed an executive order on Friday suspending key sanctions and tariffs under the Graham Act, which he signed last month at the urging of lawmakers seeking to pressure Moscow over its war in Ukraine.


However, Secretary of State Marco Rubio said the president would take up to 60 days to assess the economic impact of the waiver. The move followed a deal between Trump and Russian President Vladimir Putin to export diesel to the United States. Ukrainian President Volodymyr Zelenskiy said the US actions would hurt Ukraine.

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Brent crude briefly touched $110 a barrel on Friday, crossing that mark for the first time since May, as tensions and security threats in the Middle East raised concerns about the safety of shipping and the risk of tighter global energy supplies.

Intensified attacks on commercial vessels sharply reduced Gulf crude flows to around 8.5 million barrels per day on a seven-day average last week, down from more than 20 million bpd the previous week, analytics firm Kpler said in a note on Friday. At least 10 confirmed incidents involving commercial vessels were reported during the week, it added.

Saudi Arabia intercepted several missiles over the Red Sea on Friday, including one headed toward Yanbu, a key oil export terminal. The kingdom also destroyed three drones over Riyadh and its southern regions. Iran-backed Houthi militants in Yemen have launched repeated attacks on Saudi Arabia this week.

Last week, Aramco was also targeted on Tuesday, when one of the oil giant’s administrative buildings in Dhahran was hit. The Houthis had earlier attacked Riyadh’s international airport on October 10, killing 12 people and injuring more than 300.

Attacks in the Strait of Hormuz have added to concerns about oil shipments. At least nine tankers and cargo ships have come under attack since Sunday as Iran seeks to disrupt oil exports through the strategic waterway, per a CNBC report.

Iran sank the container ship GFS Pride on Wednesday, US Central Command said. The crew of the Singapore-registered vessel was safely evacuated, according to Singapore’s maritime authority. The International Maritime Organization said the attacks had left three seafarers injured and two missing this week.

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The conflict in the Middle East could widen further, with Egypt saying it was prepared to provide Saudi Arabia with the support needed to protect its security and stability against Yemen's Iran-allied Houthis.

Where are prices headed?

Uncertainty remains over the course of the conflict. JPMorgan analysts said the war's eventual trajectory was difficult to model. At the beginning of the conflict, the bank had expected the US administration to avoid crossing certain economic thresholds. Seven months later, many of those thresholds had been crossed, while a clear exit strategy remained elusive.

The threat of further supply disruptions has also reinforced expectations of higher oil prices. Daan Struyven, co-head of global commodities research at Goldman Sachs, said recent attacks highlighted how shipping disruptions could spread and intensify.

Goldman Sachs has outlined a scenario in which oil prices could climb to $120 a barrel if attacks on vessels in the Middle East escalate. However, a return to normal export levels could push prices down towards $80 a barrel. Struyven said risks to shipping had become a key driver of oil prices, adding that the bank saw significant upside potential for crude. Goldman Sachs also expects natural gas and refined fuel prices to rise, with supply shocks having a greater impact on gas and refined products than on crude oil.

Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.