Oil Touches $80 as US Ratchets Up Sanctions Against Russian Oil
Oil surpassed $80 a barrel as the US ratcheted up sanctions in a bid to hamper crude flows from Russia.
Brent futures rallied as much as 5% to trade at the highest since early October before paring gains. West Texas Intermediate climbed above $75. The sweeping sanctions target two firms that handle more than a quarter of Russia’s seaborne oil exports, as well as vital insurers and a vast fleet of tankers. The benchmarks had already advanced earlier in the session on a report that refiners in India were preparing for the measures.
While the market had been anticipating additional sanctions on Russia, the potential scope of the restrictions was unclear, and targeting a large number of tankers threatens to significantly constrain Russia’s ability to access vessels. Traders had also been bracing for tougher sanctions on Iranian oil, which would tighten a market already facing dwindling US stockpiles.
The tighter fundamental picture, alongside the cold weather and lower Russian seaborne exports, has buoyed the recent rally.
Under the increasingly bullish market conditions, “no one wants to be short here,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities.
Brent’s prompt spread — the price difference between its two nearest contracts — widened to as much as $1.02 a barrel in backwardation, a bullish pattern. A month ago, the spread stood at just 29 cents. Meanwhile, WTI’s prompt spread rallied to 85 cents, helping propel a measure of market volatility to the highest in more than a month.
Still, market participants caution the rally may be short-lived. Technical gauges, such as the relative strength index, signal that crude futures are overbought, and some traders caution the sanctions could be reversed once Trump takes office.
WTI for February delivery rose 2.1% to $75.49 a barrel at 11:07 a.m. in New York.
Brent for March settlement gained 2.1% to $78.50 a barrel.
Source : Bloomberg
