The United States has imposed new sanctions on Russia’s two major oil companies, Rosneft and Lukoil. Following this move, global crude oil prices have surged by 5 percent. The sanctions were issued on Thursday in response to the ongoing Ukraine war, according to a report by Reuters.
The price of Brent crude in the market rose to $65.98 per barrel, an increase of 5.4 percent. Meanwhile, US West Texas Intermediate (WTI) crude climbed to $61.81 per barrel, up 5.7 percent.
Saxo Bank’s energy analyst Ole Hansen stated that due to the US sanctions, refiners in China and India will now need to look for alternative suppliers — otherwise, they could risk being excluded from western banking networks.
Washington has warned that more measures will be taken unless Moscow agrees to an immediate ceasefire in Ukraine. Last week, the United Kingdom imposed similar sanctions on Rosneft and Lukoil. The European Union has also approved the 19th package of sanctions banning imports of Russian liquefied natural gas (LNG).
Right after the sanction announcement, the prices of Brent and WTI crude jumped by more than $2 per barrel. This was further supported by reports of declining US oil inventories.
UBS analyst Giovanni Staunovo said the real impact of the sanctions will depend on India’s response and whether Russia can find new buyers. Since the beginning of the Ukraine war, India has emerged as the largest buyer of discounted Russian seaborne oil.
Industry sources indicate that due to the new sanctions, Indian refiners may sharply reduce imports of Russian oil. India’s largest private refiner, Reliance Industries, is planning to completely stop purchasing Russian crude.
However, analysts warn that it remains uncertain whether the sanctions will significantly disrupt global oil supply and demand. Rystad Energy analyst Claudio Galimberti commented that despite three and a half years of sanctions, none have notably harmed Russia’s oil production or revenue.
Still, the recent decision by OPEC+ to increase production has limited fears of a supply shortage — helping keep oil prices from rising too sharply. UBS forecasts that Brent crude prices will likely hover between $60 to $70 per barrel in the near future.
The US Energy Information Administration (EIA) reported that crude oil, gasoline, and diesel inventories declined last week — signaling increased refining activity and stronger fuel demand.
