Key Points
- U.S. sanctions target Russian oil production and exports.
- Oil prices rise as traders brace for supply disruptions.
- India and China struggle to replace Russian oil supplies.
As traders awaited supply interruptions from new U.S. sanctions targeting Russia’s oil and gas sector, oil prices jumped about 3% on Friday, hitting their highest levels in three months.
U.S. imposes sweeping sanctions on Russian oil and gas
The government of President Joe Biden announced broad penalties that target every stage of Moscow’s oil production and distribution system. Producers, tankers, middlemen, brokers, and ports are the targets of the measures.
Brent crude futures increased $2.84, or 3.7%, to settle at $79.76 per barrel. For the first time since October 7, the benchmark hit $80 per barrel earlier in the day. West Texas Intermediate crude futures for the United States closed at $76.57 per barrel, up $2.65, or 3.6%. Following news of the penalties spreading around Europe and Asia, both benchmarks were up over 4% at their session highs.
In a video shared on social media site X, Anas Alhajji, managing partner of Energy Outlook Advisors, stated that China and India are currently frantically looking for alternatives.
Giovanni Staunovo, an analyst at UBS, predicted that the sanctions will raise prices and decrease the amount of Russian oil exported. According to him, the measures’ timing—right before President-elect Donald Trump takes office—indicates that the next administration would maintain the sanctions as leverage for a possible peace agreement with Ukraine.
Oil prices hit three-month high as supply fears grow
As stated by Reuters, due to the high cold in the US and Europe, there was a greater demand for heating oil, which caused oil prices to rise as well. “The demand for heating oil has been increasing for a number of our customers in the New York Harbor,” stated Alex Hodes, an analyst at brokerage StoneX.
Formerly known as the heating oil contract, U.S. ultra-low sulfur diesel futures gained 5.1% to close at $105.07 per barrel, the highest level since July.
According to JPMorgan analysts, liquefied petroleum gas, kerosene, and heating oil will fuel an increase in the world’s oil demand of 1.6 million barrels per day in the first quarter of 2025.
The restrictions will significantly impair Russian oil deliveries to important clients, such as China and India, according to sources in the Indian refining and Russian oil trade who spoke to Reuters.
