Oil prices wavered on Monday as markets digested the U.S. government’s decision to retreat from initial sanctions threats against Colombia. This move eased immediate fears of supply disruptions but left traders on edge. Both Brent and U.S. crude benchmarks oscillated between gains and losses, reflecting heightened market uncertainty.

By midday GMT, Brent crude futures had slipped 36 cents, or 0.5%, to $78.14 per barrel, while U.S. West Texas Intermediate (WTI) crude fell 39 cents, or 0.5%, to $74.27 per barrel.

U.S. Reverses Course on Colombia Sanctions

The White House announced late Sunday that sanctions and tariffs on Colombia would not proceed after the South American nation agreed to accept deported migrants from the U.S. Data from analytics firm Kpler reveals that Colombia sent approximately 41% of its seaborne crude exports to the U.S. in 2023, underscoring the significance of this trade relationship.

“Even without actual sanctions, the mere threat has rattled the market,” noted Bjarne Schieldrop, SEB’s chief commodities analyst. He highlighted the tightness of the market, with time spreads signaling a premium for immediate crude delivery.

Trump Targets OPEC and Russia

Adding to the volatility, former U.S. President Donald Trump reiterated his call for the Organization of the Petroleum Exporting Countries (OPEC) to slash oil prices. Trump argued that lower prices could undercut Russia’s revenues and hasten the end of the war in Ukraine. He also threatened to impose tariffs and sanctions on Russia and other oil-exporting nations if progress toward resolving the conflict isn’t made soon.

Russian President Vladimir Putin responded by suggesting a meeting with Trump to discuss energy prices and the Ukraine conflict. John Driscoll, an analyst at Singapore-based JTD Energy, observed that this back-and-forth has heightened market volatility. “Trump’s push to boost U.S. output while eyeing OPEC’s market share sets the stage for intense competition,” Driscoll added.

Mixed Reactions and Market Dynamics

Despite Trump’s pressure, OPEC and its allies, including Russia, have yet to react formally, pointing instead to an existing plan to increase oil output starting in April. Both Brent and WTI posted their first weekly losses in five weeks amid easing concerns over sanctions-related supply disruptions.

Goldman Sachs analysts suggested that the impact on Russian oil production might remain limited, as higher freight rates have incentivized non-sanctioned ships to transport Russian crude. However, JP Morgan analysts warned that nearly 20% of the global Aframax fleet faces sanctions, justifying a degree of risk premium.

Weaker Chinese Manufacturing Data Adds Pressure

Further weighing on the market, weaker-than-expected Chinese manufacturing data released on Monday raised fresh concerns about energy demand. This added to the cautious sentiment surrounding oil markets already contending with geopolitical uncertainty.