Oil prices rally 3% as US hits Russian oil with tougher sanctions

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.

President Joe Biden’s administration 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 settled at USD 79.76 a barrel, up USD 2.84, or 3.7%, after crossing USD 80 a barrel for the first time since Oct.7.

US West Texas Intermediate crude futures rose USD 2.65, or 3.6%, to settle at USD 76.57 per barrel, also a three-month high.

At their session high, both contracts were up more than 4% after traders in Europe and Asia circulated an unverified document detailing the sanctions.

Sources in Russian oil trade and Indian refining told Reuters the sanctions would severely disrupt Russian oil exports to its major buyers India and China.

“India and China (are) scrambling right now to find alternatives,” Anas Alhajji, managing partner at Energy Outlook Advisors, said in a video posted to social network X.

The sanctions will cut Russian oil export volumes and make them more expensive, UBS analyst Giovanni Staunovo said.

Their timing, just a few days before President-elect Donald Trump’s inauguration, 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 were also buoyed as extreme cold in the US and Europe has lifted demand for heating oil, Alex Hodes, analyst at brokerage firm StoneX, said.

“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.

US ultra-low sulfur diesel futures, previously called the heating oil contract, rose 5.1% to settle at USD 105.07 per barrel, the highest since July.

“We anticipate a significant year-over-year increase in global oil demand of 1.6 million barrels a day in the first quarter of 2025, primarily boosted by … demand for heating oil, kerosene, and LPG,” JPMorgan analysts said in a note on Friday.

(Reporting by Shariq Khan; Additional reporting by Anna Hirtenstein, Enes Tunagur, and Sudarshan Varadhan; Editing by David Goodman and Frances Kerry, Kirsten Donovan, Deepa Babington, Louise Heavens, and David Gregorio)