Oil rises nearly 5% on fresh US sanctions against Russia
Oil prices rose nearly 5% on Thursday after the U.S. imposed sanctions on major Russian suppliers Rosneft and Lukoil over Russia’s war in Ukraine, extending gains from the previous session.
Brent crude futures were up $2.99, or 4.8%, at $65.58 a barrel at 1330 GMT, while U.S. West Texas Intermediate crude futures were up $2.93, or 5%, at $61.43.
Multiple trade sources told Reuters that Chinese state oil majors have suspended purchases of seaborne Russian oil from the two companies, providing a further boost to prices.
However, prices pared some gains after the Kuwaiti oil minister said that the OPEC group would be ready to offset any shortage in the market by rolling back output cuts.
The U.S. sanctions mean refineries in China and India, major buyers of Russian oil, will need to seek alternative suppliers to avoid exclusion from the Western banking system, according to Saxo Bank analyst Ole Hansen.
The U.S. said it was prepared to take further action as it called on Moscow to agree immediately to a ceasefire in Ukraine.
Britain sanctioned Rosneft and Lukoil last week. EU countries have approved a 19th package of sanctions against Russia that includes a ban on imports of Russian LNG.
Prompt Brent crude futures switched to backwardation as the first-month Brent contract traded at nearly $2 a barrel above the contract for delivery in six months.
Right after the U.S. sanctions were unveiled, Brent and WTI futures rose by more than $2 a barrel, with support from a surprise decline in U.S. stockpiles.
The impact of sanctions on oil markets will depend on how India reacts and if Russia finds alternative buyers, said UBS analyst Giovanni Staunovo.
India became the largest buyer of discounted seaborne Russian crude in the aftermath of Moscow’s war in Ukraine.
Indian refiners are likely to sharply curtail imports of Russian oil due to the new sanctions, industry sources said on Thursday.
Privately-owned Reliance Industries, the top Indian buyer of Russian crude, plans to reduce or halt such imports completely, according to two sources familiar with the matter.
But there remains some scepticism in the market about whether the U.S. sanctions would result in a fundamental shift in supply and demand.
Source: Reuters.com
