Oil prices rose 5% on Thursday following US sanctions on major Russian suppliers over the Ukraine war, continuing gains made in the previous session.
Brent crude futures were up $3.39, or 5.4%, at $65.98 a barrel by 1018 GMT, while U.S. West Texas Intermediate crude futures were up $3.31, or 5.7%, at $61.81.
US sanctions mean that refiners in China and India, major buyers of Russian oil, will have to look for alternative suppliers to avoid exclusion from the Western banking system, according to Ole Hansen, an analyst at Saxo Bank.
The United States said it was prepared to take further action and called on Moscow to immediately agree to a ceasefire in Ukraine.
Britain sanctioned Rosneft and Lukoil last week. EU countries approved the 19th package of sanctions against Russia that includes a ban on imports of Russian LNG.
Brent crude futures switched to forwarding when the front-month Brent contract traded as much as $1.98 above the contract for delivery in six months.
Immediately after the US sanctions were announced, Brent and WTI futures rose more than $2 per barrel, supported by a surprise drop in US stockpiles.
The impact of sanctions on oil markets will depend on how India reacts and whether Russia finds alternative buyers, said UBS analyst Giovanni Staunovo.
India became the biggest buyer of discounted Russian seaborne crude oil following Moscow’s war in Ukraine.
Indian refiners are likely to sharply reduce imports of Russian oil due to new sanctions, industry sources said on Thursday.
Privately held Reliance Industries, India’s biggest buyer of Russian crude, plans to reduce or completely stop such imports, according to two sources familiar with the matter.
But there remains some skepticism in the market about whether US sanctions would result in a fundamental shift in supply and demand.
“So far, almost all sanctions against Russia over the last three and a half years have failed to reduce either the volumes produced by the country or oil revenues,” said Claudio Galimberti, an analyst at Rystad Energy.
Concerns about oversupply following OPEC+ production increases limited crude oil’s gains on Thursday. UBS expects Brent to remain between $60 and $70.
On the demand side, there was a decline in U.S. crude oil, gasoline and distillate inventories last week as refining activity and demand increased, the Energy Information Administration reported Wednesday.
(Reuters)