LONDON, ( TECHY QUANTUM) ~ Oil prices rose sharply Thursday after the United States announced new Russia oil sanctions, targeting major producers Rosneft and Lukoil in an effort to curb Moscow’s energy revenue amid the ongoing war in Ukraine.
The move, part of a coordinated Western campaign, sent global crude benchmarks higher and prompted Asian refiners to reassess supply options.
Brent crude futures climbed $2.98, or 4.8 percent, to $65.57 a barrel at 1211 GMT, while US West Texas Intermediate (WTI) crude gained $3.01, or 5.2 percent, to reach $61.51. Analysts said the surge reflected both the latest Russia oil sanctions and a surprise drop in US stockpiles.
The sanctions mark one of Washington’s most sweeping actions against Russia’s energy sector since the invasion of Ukraine began in 2022.
The measures target state run Rosneft and privately held Lukoil two of Moscow’s largest crude exporters blocking their access to Western banking systems and restricting global trade partnerships.
“The United States will continue to hold Russia accountable for funding its war through oil sales,” said a Treasury Department spokesperson in a statement. “We call on Moscow to cease hostilities and return to diplomatic negotiations.”
Britain had already imposed penalties on Rosneft and Lukoil last week, while the European Union recently approved its nineteenth sanctions package, which includes a ban on Russian liquefied natural gas (LNG) imports.
The combined Western actions could have far reaching effects on energy flows to Asia, where India and China have become the main buyers of discounted Russian crude since 2022.
Energy analysts say the Russia oil sanctions could reshape global supply routes, though they remain cautious about how long the price rally might last.
“Ongoing sanctions pressure is forcing traders to rethink crude flows,” said Ole Hansen, head of commodity strategy at Saxo Bank.
“If India and China reduce purchases to avoid compliance risks, we could see tightening in the short term.” UBS commodity strategist Giovanni Staunovo said India’s role is crucial in determining the outcome.
“If Indian refiners curtail imports, Brent prices may stabilize around $70 a barrel,” he said. “But Russia has a history of finding alternative routes, including non dollar transactions and shadow fleets.”
However, skepticism persists among industry experts. “Over the last three years, sanctions have done little to significantly reduce Russia’s output,” said Claudio Galimberti of Rystad Energy.
“Moscow has adapted quickly, often rerouting shipments through smaller intermediaries outside Western jurisdiction.” The Russia oil sanctions have intensified volatility in global markets already struggling with mixed supply signals.
Following Washington’s announcement, prompt Brent crude entered backwardation where near term prices trade above longer dated contracts indicating tighter short term supply.
The front month Brent contract traded nearly $2 a barrel higher than for delivery in six months. The US Energy Information Administration reported declines in crude, gasoline, and distillate inventories last week as demand strengthened.
The data offered additional support to prices. Despite the rebound, analysts warn that OPEC+ production increases could offset some upward pressure.
“OPEC+ has capacity to raise supply if prices spike too fast,” said Ben Cahill, senior fellow at the Center for Strategic and International Studies. UBS expects Brent crude to remain in the $60 to $70 range through the fourth quarter.
The sanctions have triggered unease among refiners in India, now the world’s largest buyer of Russian seaborne crude.
“We’re evaluating compliance obligations very carefully,” said an executive at Reliance Industries, India’s top private refiner. “Supply diversification is on the table, but we can’t afford disruptions to fuel security.”
Indian government officials privately expressed concern about the potential fallout. “Any disruption in Russian oil imports could increase input costs,” said a senior energy ministry official, speaking on condition of anonymity.
“We are monitoring global reactions before making adjustments.” In China, refiners have also slowed purchases amid uncertainty. “Russian oil was a bargain, but secondary sanctions risk is real,” said Lin Zhao, a Beijing based energy analyst.
“Many refiners are looking toward Middle Eastern suppliers as a hedge.” Traders in Singapore reported limited spot activity. “Buyers are cautious until payment mechanisms are clarified,” said Lim Wei Han, a senior trader at an independent oil firm.
The financial exposure is becoming too complex. The effectiveness of Russia oil sanctions will hinge on enforcement and market adaptability.
Analysts believe Russia will continue using alternative payment systems and “shadow fleets” to circumvent restrictions, though rising costs and insurance hurdles may limit profitability.
“Sanctions enforcement has become a cat and mouse game,” said Edward Marshall, geopolitical analyst at Horizon Strategies. “Russia’s ability to sustain exports depends on how strictly Western allies monitor ship to ship transfers and gray market financing.”
Washington has warned that further action could follow if Moscow continues military operations. “We are prepared to take additional steps as necessary,” a senior US official said Thursday, hinting at possible measures targeting maritime logistics and insurance sectors.
Energy markets are expected to remain volatile in the near term as traders adjust to evolving trade patterns. “Even small shifts in Russian export volumes can swing prices dramatically,” Staunovo of UBS noted.
As Russia oil sanctions tighten under new US measures, global energy markets face renewed uncertainty. The sanctions have propelled crude prices higher, yet questions remain about their long term impact on supply, trade routes, and geopolitical stability.
For now, refiners in Asia are treading carefully, balancing compliance with energy security, while Western governments continue to test the limits of economic pressure on Moscow’s vital oil sector.