WTI crude price rises as US lawmakers seek to impose steep tariffs on buyers of Russian oil

Rising geopolitical tensions have boosted crude prices since end-May, as US lawmakers are seeking to impose steep tariffs on buyers of Russian crude in response to Russia's ongoing war with Ukraine.

Platts assessed spot WTI at Cushing, Oklahoma at $63.41/b on June 3, up $2.62 from May 30. Platts is a unit of S&P Global Commodity Insights.

The White House acknowledged the push by lawmakers to expand sanctions on Russia without providing insight into US President Donald Trump's next move.

"The president has spoken about his position on sanctions on Russia," White House Press Secretary Karoline Leavitt said June 3, when asked if Trump supported the Senate bill imposing heavier sanctions. "He has smartly kept this as a tool in his toolbox, if necessary," she said. "But I think the Senate and everyone on Capitol Hill respect the president as the commander in chief for a reason."

Senators Lindsey Graham, Republican-South Carolina, and Richard Blumenthal, Democrat-Connecticut, say Congress must pass their sanctions legislation soon to prepare for the possibility that Russian President Vladimir Putin will ramp up the war this summer or fall.

"Putin is launching, even as we speak, a major offensive," Blumenthal said June 3 on MSNBC. "He is mocking Trump, playing him."

The bill would put primary and secondary sanctions against Russia and actors supporting Russia's war in Ukraine if Russia fails to engage in good-faith negotiations. The measure would also impose a 500% tariff on imported goods from countries that buy Russian oil, gas, uranium and other products.

The legislation is needed to persuade China and India to stop buying Russian oil, Blumenthal said.

"Our sanctions bill would make a tremendous difference in stopping the flow of revenue to Putin's war machine," Blumenthal said. "500% tariffs on any country buying oil and gas from Russia would target India and China: they buy 70% of it," he said.

Russian crude exports have been steady despite a $60/b price cap imposed on Russian crude sales and stricter European sanctions.

Exports of Russian-origin crude averaged 3.6 million b/d in May, with 1 million b/d going to China and 1.7 million b/d going to India, S&P Global Commodities at Sea data shows.

"Urals last settled above the G7's $60/b price cap on April 2, a stark reality addressed by the EU and UK during their latest sanctions announcement on May 20," S&P Global Commodities Insights analysts Mark Esposito and Benjamin Tang said in a report. "As part of the latest round of sanctions, EU member states targeted an additional 189 tankers, while the UK added 18 more vessels to its growing list of sanctioned ships. Additionally, the UK Foreign Office acknowledged a concerted effort to evaluate the current effectiveness of the price cap in response to softening oil prices, underscoring the challenges faced in stymying Russian crude flows amidst fluctuating market conditions."

Push to advance bill

The lawmakers plan to push the Senate to use the Rule 14 process to quickly bring the bill, S.1241, to the Senate floor, the statement said.

Senate Majority Leader John Thune listed sanctions as one of many items the chamber would be tackling in June.

Speaking on the Senate floor June 2, Thune said that senators "stand ready to provide President Trump with any tools he needs to get Russia to finally come to the table in a real way."

New sanctions pose a broader tactical question, since Washington is in tough trade talks with Beijing, Nicholas Burns, the former US Ambassador to China during the Biden Administration, said during a June 3 Brookings Institution event.

"We obviously need to have a trade deal with China by this autumn," Burns said. Deploying new sanctions would hurt Russia in the short term, but there would also be workarounds, he said.

"You'd have to gauge, if you are President Trump or Secretary [Marco] Rubio, how much value does it really bring us, and how many headaches does it cause us on the other things we're trying to do," Burns said.