Oil prices climb to new highs; new U.S. sanctions on Russia possible?

Investing.com--Oil prices rose Monday, extending gains from the previous week and climbing to three-week highs, as investors weighed the prospect of additional U.S. sanctions on Russia, further tightening the global market.

At 21:22 ET (01:22 GMT), Brent Oil Futures expiring in September rose 0.2% to $70.48 per barrel and West Texas Intermediate WTI crude futures also gained 0.2% to $68.55 per barrel.

Trump to make ’major statement’ on Russia

Crude traders are eagerly awaiting an announcement from U.S. President Donald Trump later Monday, after he said last week that he plans to make a “major statement" on Russia on Monday.

"There’s the potential that Trump could announce additional sanctions on Russia. This could dramatically shift the oil outlook if sanctions target Russian energy," said analysts at ING, in a note.

Trump has recently expressed frustration with Russian President Vladimir Putin due to the lack of progress on peace with Ukraine, and he followed this with the announcement that he will send Patriot air defense missiles to Ukraine.

A bipartisan U.S. bill imposing sanctions on Russia to spur Ukraine peace talks is gaining traction in Congress, but still awaits key support from the White House.

This bill would slap U.S. trading partners, including China and India, with 500% tariffs on their products if they make any purchases of Russian oil and gas.

Crude market remains tight - IEA

Both contracts rose nearly 3% last week, with sharp gains on Friday after the International Energy Agency highlighted a tight prompt market.

Despite OPEC+’s higher-than-expected output hike, the world oil market may be tighter than it appears, the agency said on Friday, as refineries ramp up processing to meet summer travel demand.

The latest positioning data shows that speculators increased their net long positions in ICE Brent by 55,630 lots over the last reporting week to 222,347 lots as of last Tuesday.

"The move was predominantly driven by fresh longs entering the market. Speculators appear to be influenced more by short-term dynamics rather than the medium-term outlook," said ING. "The oil balance suggests the market should be tight through the third quarter, before moving into a large surplus from the fourth quarter."

Trump tariff spree limits gains

Investors are also eyeing the outcome of U.S. tariff talks with key trading partners, after Trump said on Saturday he would impose a 30% tariff on most imports from the European Union and Mexico from August 1.

Earlier in the week, Trump announced new tariffs on a number of countries, including Japan, South Korea, Canada, and Brazil, along with a 50% tariff on copper, all effective August 1.

With less than three weeks left to hash out trade deals, investors were cautiously awaiting further tariff action.

Tariffs often slow global growth by disrupting trade and raising costs, which in turn weakens industrial activity and travel, both major drivers of oil demand.

Ayushman Ojha contributed to this article