Oil prices react sharply to US sanctions against Russian oil giants
Oil prices rose by more than 4% on 23 October, extending gains from the previous session.
Source: Reuters
Details: Prices increased as Indian buyers began reviewing their purchases of Russian oil after the United States imposed sanctions on major Russian suppliers – Rosneft and Lukoil – over Moscow's full-scale war against Ukraine.
Brent crude oil futures rose by US$2.71, or 4.3%, to US$65.30 per barrel as of 08:41 GMT.US West Texas Intermediate (WTI) crude futures climbed by US$2.56, or 4.4%, to US$61.06 per barrel. (Data updated as of 13:00 Kyiv time)
The US stated that it was prepared to take further measures, calling on Moscow to agree immediately to a ceasefire in its war against Ukraine.
Last week, the United Kingdom imposed sanctions on Rosneft and Lukoil, while EU countries approved their 19th sanctions package against Russia, including a ban on importing Russian LNG.
Quote from Priyanka Sachdeva, Senior Market Analyst at Phillip Nova: "President Trump's fresh sanctions hitting Russia's biggest oil houses aim squarely at choking Kremlin war revenues – a move that could tighten physical flows of Russian barrels and force buyers to re-route volumes onto the open market."
Details: She noted that immediately after the US sanctions were announced, Brent and WTI futures had risen by more than US$2 per barrel, further supported by an unexpected drawdown in US inventories.
Sachdeva added that if New Delhi were to cut purchases under US pressure, Asian demand could shift towards US crude, pushing up Atlantic prices.
India's state-owned oil refineries said they were reviewing their purchases of Russian crude to ensure that no shipments come directly from Rosneft or Lukoil following the new US sanctions.
Meanwhile, private firm Reliance Industries – India's largest buyer of Russian crude – announced plans to adjust its imports of Russian oil in line with government recommendations.
According to sources, Reliance plans to sharply reduce imports of Russian oil due to EU and US sanctions, while other Indian refiners are also expected to make significant cuts.
However, market scepticism about whether US sanctions will cause a real shift in supply and demand fundamentals has limited further oil price gains.
Quote from Claudio Galimberti, Global Market Analysis Director at Rystad Energy: "The new sanctions are certainly upping the ante between the US and Russia, but I see the oil price jump more like a knee-jerk reaction rather than a structural shift."
"So far, almost all the sanctions against Russia for the past 3.5 years have mostly failed to dent either the volumes produced by the country or the oil revenues," he added, noting that some buyers in India and China continue to purchase Russian oil.
Details: In the short term, markets viewed the OPEC+ oversupply resulting from eased production cuts as a key factor influencing prices.
Galimberti said that the three factors he would be watching in November were OPEC+ cuts, China's crude stockpiling, and the wars in Ukraine and the Middle East – in that order.
Background: Indian oil refineries are reportedly preparing to sharply reduce imports of Russian oil following the US sanctions imposed on Lukoil and Rosneft.
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