Traders anticipated supply disruptions as the US announced its harshest sanctions package yet on Russian oil and gas exports, sending oil prices up to their highest levels in three months on Friday. Crude oil prices surged by approximately 3% as a result of the world’s reaction to the US government’s actions.
The Biden administration has launched yet another wave of sanctions against Russia in an effort to cut into the country’s oil exports. Stripping Russia of its oil supply chain, the new sanctions hit producers, tankers, intermediates, dealers, and ports all in an effort to choke the country’s oil economy.
These measures are a component of a larger strategy to undermine Russia’s capacity to profit from its strategic oil and gas reserves. The final price for a barrel of Brent oil futures was $79.76. With a remarkable 3.7% rise, Brent oil futures broke past the $80/barrel barrier for the first time since October 7. As the market braces itself for the potential impact of sanctions on Russia’s export quantities, Brent appears to be following suit.
Crude Oil Prices in West Texas Intermediate (WTI) Rise Sharply
Concurrently, U.S. West Texas Intermediate oil futures had a dramatic spike, finishing the day at $76.57 per barrel, an increase of $2.65, or 3.6%. As rumors swirled about a purportedly leaked document detailing the specifics of U.S. sanctions, which were never confirmed, crude oil benchmarks soared over 4% to new highs.
India and China are two of Russia’s most important markets for oil, and according to industry insiders there, these sanctions will make it very difficult for Russia to sell oil to those countries. Market participants are increasingly worried about possible shortages in supplies due to this possible disruption.
Oil Prices Rise Amid Worries About Supply and Demand
Oil price increases were bolstered by the anticipation of higher demand. As winter weather sweeps throughout the Northern Hemisphere, heating fuel use is anticipated to climb. The world’s largest consumer market for oil continues to have robust demand, according to a survey that shows U.S. crude stocks have fallen for seven consecutive weeks.
Concerns over the availability of oil throughout the world were heightened by the news that Russian seaborne oil shipments have dropped to their lowest level since August 2023. Meanwhile, oil prices have been sustained thus far by supply interruptions and rising demand, but there are a few factors that are limiting future rises. Reasons given for the reduction in upside include the fact that demand signals are weak in China, where inflation is almost nonexistent, and that oil is costly for purchasers outside because to the strength of the US dollar.
Heating oil’s main component, U.S. ultra-low sulfur diesel futures, rose 5.1% to $105.07/bbl, adding to the rise in crude prices. Diesel prices haven’t been this high since July 2023. As winter approaches, inflationary pressures will undoubtedly be amplified by the rising costs of diesel and heating oil.
As a result of supply and demand factors, experts predict that oil prices will continue to fluctuate in the future. While cold weather and strong U.S. demand should boost oil prices, sluggish Chinese demand and the persistent strength of the U.S. currency could hinder long-term growth. The predicted range for crude oil prices is between $73.05 to 72.50 per barrel, with $74.20-74.90 per barrel serving as resistance and other possible support levels, according to market analysts.
