Oil Prices Surge Amid U.S. Sanctions on Russian Oil Exports
Oil prices continued their upward momentum for a third consecutive session on Monday, with Brent crude surpassing $81 per barrel, reaching its highest point in over four months. The price hike comes as U.S. sanctions on Russian oil are expected to significantly impact Russia’s crude exports to key buyers like China and India.
By 0113 GMT, Brent crude futures had climbed by $1.48, or 1.86%, to $81.24 per barrel, after hitting an intraday high of $81.49, the highest since August 27. Meanwhile, U.S. West Texas Intermediate (WTI) crude rose by $1.53, or 2%, to $78.10 per barrel, reaching $78.39 at its peak, the most since October 8.
Both Brent and WTI have seen gains of more than 6% since January 8, following the U.S. Treasury Department’s decision to impose additional sanctions on Russian oil producers. The new sanctions specifically target Gazprom Neft, Surgutneftegas, and 183 vessels involved in Russian oil shipments. The sanctions are part of the ongoing effort to disrupt Russia’s revenue flow, which has been used to fund its ongoing conflict with Ukraine.
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The sanctions are set to severely affect Russian oil exports, pushing China and India—the world’s top and third-largest oil importers, respectively—to seek more crude from alternative sources such as the Middle East, Africa, and the Americas. This shift in sourcing is expected to drive up oil prices and shipping costs.
Analysts at RBC Capital noted that the new sanctions contribute to an already uncertain global oil supply outlook for the first quarter of the year. They estimated that the new sanctions would cover vessels linked to around 1.5 million barrels per day (bpd) of Russian seaborne crude activity in 2024, including 750,000 bpd of exports to China and 350,000 bpd to India.
The increased number of sanctioned tankers is expected to create logistical challenges, particularly in India, where many of the vessels were previously used for transporting Russian oil. The sanctions could further disrupt the flow of Russian crude, especially as Western sanctions and the G7 price cap on Russian oil have already led to a shift in trade patterns from Europe to Asia. Some of these ships were also involved in transporting oil from Iran, which is also under sanctions.
According to Harry Tchilinguirian, Head of Research at Onyx Capital Group, the sanctions will have a significant impact on India, marking a new phase in the ongoing struggle to isolate Russian energy exports globally.
