Oil Prices Surge 3% Following Tougher U.S. Sanctions on Russian Oil.
Oil prices soared nearly 3% on Friday, reaching a three-month high as traders anticipated supply disruptions stemming from the most extensive U.S. sanctions to date targeting Russia’s oil and gas revenues.
The Biden administration introduced fresh sanctions that encompass Russian oil producers, tankers, intermediaries, traders, and ports, effectively aiming to disrupt all stages of Moscow’s oil production and distribution network.
Brent crude futures rose by $2.84, or 3.7%, to settle at $79.76 per barrel, surpassing $80 during the session for the first time since October 7. Similarly, U.S. West Texas Intermediate crude climbed $2.65, or 3.6%, to close at $76.57 per barrel, also marking a three-month peak.
Both benchmarks saw gains of over 4% earlier in the day as an unverified document detailing the sanctions circulated among traders in Europe and Asia.
Sources in Russian oil trade and Indian refining told Reuters that the sanctions are expected to severely disrupt Russian oil exports to major buyers such as India and China.
“India and China are scrambling to find alternatives,” noted Anas Alhajji, managing partner at Energy Outlook Advisors, in a video posted on social platform X.
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The sanctions are predicted to reduce Russian oil exports and increase costs, according to UBS analyst Giovanni Staunovo. He added that the timing of the measures—just days before President-elect Donald Trump’s inauguration—suggests Trump may retain the sanctions as leverage for negotiating a peace agreement in Ukraine.
Adding to the upward pressure on prices, extreme cold weather across the U.S. and Europe has spurred higher demand for heating oil.
“We’ve observed an increase in heating oil demand among our New York Harbor customers,” said Alex Hodes, an analyst at brokerage firm StoneX. U.S. ultra-low sulfur diesel futures, previously known as the heating oil contract, surged 5.1% to close at $105.07 per barrel, the highest since July.
Looking ahead, JPMorgan analysts forecast a significant increase in global oil demand, projecting a year-over-year rise of 1.6 million barrels per day in the first quarter of 2025. This growth is expected to be driven largely by heightened consumption of heating oil, kerosene, and liquefied petroleum gas.
