Oil prices surged nearly 3% to their highest levels in three months on Friday, as traders anticipated supply disruptions following the U.S. administration’s announcement of a new sanctions package aimed at targeting Russian oil and gas revenue.
President Joe Biden’s government imposed fresh sanctions on Russian oil producers, tankers, intermediaries, traders, and ports, aiming to disrupt every stage of Moscow’s oil production and distribution processes.
Brent crude futures settled at $79.76 a barrel, rising by $2.84, or 3.7%, after briefly crossing $80 per barrel for the first time since October 7. U.S. West Texas Intermediate crude futures also gained $2.65, or 3.6%, to settle at $76.57 per barrel, marking a three-month high.
Read MOre: International Oil Prices Hit 2.5-Month Low
At their session peaks, both contracts had risen by over 4%, as traders in Europe and Asia circulated an unverified document detailing the sanctions. Sources within the Russian oil trade and Indian refining sectors indicated that these sanctions would severely disrupt Russian oil exports to its major buyers, India and China.
“India and China are scrambling right now to find alternatives,” said Anas Alhajji, managing partner at Energy Outlook Advisors, in a video posted on social media platform X.
Analysts, including UBS’s Giovanni Staunovo, noted that the sanctions would reduce Russian oil export volumes and make shipments more expensive. The timing of the sanctions, just days before President-elect Donald Trump’s inauguration, suggests that Trump may maintain these sanctions and use them as leverage in negotiations for a potential Ukraine peace treaty, Staunovo added.
Oil prices were further supported by extreme cold temperatures in the U.S. and Europe, which drove up demand for heating oil. Alex Hodes, an analyst at brokerage firm StoneX, pointed out that heating oil demand had increased in New York Harbor, alongside a rise in other heating fuels.
U.S. ultra-low sulfur diesel futures (formerly known as the heating oil contract) jumped 5.1%, settling at $105.07 per barrel, the highest since July. JPMorgan analysts also predicted a significant year-over-year increase in global oil demand for the first quarter of 2025, with a 1.6 million barrels per day rise, primarily driven by increased demand for heating oil, kerosene, and liquefied petroleum gas (LPG).
