Well, this is up for debate.
The cop/fellatio scene is one of the many moments overseen during the voyeuristic Love Hotel sequence towards the end of the film. Earlier in the film, while looking over the neon model of the city at his friend's apartment, we first see a model of the hotel, with the total non-discreet name "Love Hotel" outside, in English (which-- unless it's largely catering to Americans seeking local prostitutes--seems unlikely in Japan). Oscar ponders aloud about seeing everyone they know having sex in the hotel.
Later, when we take the trip through the hotel, we see pretty much exactly that: Victor's mom (having sex with what I presume/hope to be his father for a change), the drug dealer in bed next to another couple, Victor as discussed, and ending on Alex and his sister having sex.
Personally, I'd like to assume that the sequence is a passing fantasy of his, as his spirit travels the city. You could view his seeing Victor doing that as a vengeful fantasy on his part for betraying him (because really, even if Victor HAD to do that, it's not like he had to do so in a love hotel, they all could've done so for free in a bathroom or even an alley).
And frankly, I would REALLY like to think that the very idea of Alex taking his sister to a Love Hotel and having unprotected sex with her (where he ends up impregnating her) the first time he's seen her after his friend-- and the person they had in common-- has been killed, is also some kind of deranged fantasy… 'cause frankly, that would be pretty sleazy of both of them (and disrespectful towards not just Oscar, but for herself).
But as they say, I suppose there's no accounting for taste...
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