Oil Prices Rise On Expectations Of New US Sanctions
Oil prices extended gains for a third session on Monday, with Brent rising above $81 a barrel to its highest in more than four months, as broader US sanctions are expected to impact Russian crude exports to top buyers China and India.
Brent crude futures rose $1.48, or 1.86%, to $81.24 a barrel by 0113 GMT after hitting an intraday high of $81.49, the highest since Aug. 27.
U.S. West Texas Intermediate crude futures rose $1.53, or 2%, to $78.10 a barrel after hitting a high of $78.39, the highest since Oct. 8.
Brent and WTI have risen more than 6% since Jan. 8 and both contracts jumped after the U.S. Treasury Department imposed broader sanctions on Russian oil on Friday. The new sanctions cover producers Gazprom (MCX:GAZP) Neft and Surgutneftegas, as well as 183 vessels that have been shipping Russian oil, targeting revenues that Moscow has used to fund its war with Ukraine.
Russian oil exports will be hit hard by the new sanctions, which are pushing China and India, the world’s largest and third-largest oil importers respectively, to source more crude from the Middle East, Africa and the Americas, which will push up prices and shipping costs, traders and analysts said.
“The new Russian sanctions from the outgoing administration are a net addition to supply risks, adding uncertainty to the (first quarter) outlook,” RBC Capital analysts said in a note.
The bank estimates the latest round of sanctions covers vessels linked to 1.5 million barrels per day of Russian seaborne crude in 2024. That includes 750,000 barrels per day of exports to China and 350,000 barrels per day to India. “Overall, the doubling of the number of tankers sanctioned for carrying Russian barrels could become a major logistical bottleneck for crude flows post-invasion,” analysts said.
Many of the tankers named in the latest sanctions have been used to ship oil to India and China as previous Western sanctions and price caps imposed by the Group of Seven nations in 2022 diverted Russian oil trade from Europe to Asia. Some vessels have also moved oil from Iran, which is also sanctioned.
“The latest round of OFAC sanctions targeting Russian oil companies and a large number of tankers will have a particular impact on India,” said Harry Tchilinguirian, head of research at Onyx Capital Group.
Source: Investing.com
