NEW YORK: Oil prices rallied nearly 3% to their highest in three months on Friday as traders braced for supply disruptions from the broadest US sanctions package targeting Russian oil and gas revenue.
The Biden administration on Friday imposed fresh sanctions targeting Russian oil producers, tankers, intermediaries, traders and ports, aiming to hit every stage of Moscow’s oil production and distribution chains.
Brent crude futures were up $2.53, or 3.3%, to $79.45 a barrel by 1:16 p.m. EST [1816 GMT], after crossing $80 a barrel for the first time since Oct.7. US West Texas Intermediate crude futures advanced $2.38, or 3.2%, to $76.30, also a three-month high. Both contracts had gained more than 4% earlier in the session after an unverified document detailing the sanctions was circulated among traders in Europe and Asia.
Sources in Russian oil trade and Indian refining told Reuters that the sanctions will cause severe disruption of Russian oil exports to its major buyers India and China. The sanctions will hit Russian oil export volumes and make them more expensive, UBS analyst Giovanni Staunovo said.
Their timing, just a few days before Donald Trump’s inauguration as the US president, makes it likely that Trump will keep the sanctions in place and use them as a negotiating tool for a Ukraine peace treaty, Staunovo added.
Oil prices are also being supported by extreme cold in the United States and Europe, which has lifted demand for heating oil, Alex Hodes, analyst at brokerage firm StoneX, said. The US weather bureau expects central and eastern parts of the country to experience below-average temperatures. Many regions in Europe are likely to continue to experience a chillier-than-usual start to the year.
“We have several customers in the New York Harbor that have been seeing an uptick in heating oil demand,” Hodes said. “We have seen a bid in other heating fuels as well,” he added.
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