Oil Prices Spike as U.S. Sanctions Russian Energy Giants Rosneft, Lukoil
WTI crude futures jump nearly 4% on supply fears, boosting shares of Western oil majors as Washington tightens economic pressure on Moscow.
Global oil prices surged on Thursday after the United States imposed sweeping new sanctions on Russia's two largest energy companies, Rosneft and Lukoil, threatening to tighten global crude supply and escalating economic pressure on Moscow.
The move sent West Texas Intermediate (WTI) crude futures soaring nearly 4% to trade above $60 a barrel, while Brent crude, the international benchmark, climbed more than 3.7% to approach $65. The rally immediately lifted the stocks of major Western oil producers, who stand to benefit from higher energy prices.
In a statement, the U.S. Department of the Treasury announced it was freezing all U.S.-based assets of the Russian oil giants and prohibiting American entities from engaging in business with them. The Treasury cited Russia's “lack of serious commitment to a peace process” as the primary driver for the new measures. The action represents one of the most significant steps taken to target Russia's energy sector, a critical source of revenue for the Kremlin.
"These actions target the companies funding the Kremlin's war machine," said Treasury Secretary Scott Bessent in the press release. The department also issued a general license authorizing a 30-day period, until November 21, for companies to wind down transactions with the sanctioned entities.
The market reaction was swift and pronounced. Shares of Exxon Mobil (XOM) rose 1.8% in early trading, while rival Chevron (CVX) gained 1.2%. The gains reflect investor expectations that reduced access to Russian oil on the global market will create a supply gap that other international and U.S.-based producers will be positioned to fill at more profitable prices.
The sanctions' impact extends beyond financial markets, with the potential to significantly re-route global energy flows. The Treasury department warned of secondary sanctions on foreign entities that continue to do business with Rosneft and Lukoil, a move that could disrupt sales to major importers like India and China. Reports indicate that India, a significant buyer of Russian seaborne crude, is already reviewing its import strategy to avoid being targeted by U.S. measures.
Analysts believe the sanctions could remove a substantial volume of Russian crude from the market if enforced strictly, though the ultimate impact will depend on compliance from Russia’s key trading partners. The measures introduce a new layer of volatility into an already tense geopolitical landscape, with energy traders closely watching for any retaliatory actions from Moscow.
The development places non-Russian Exploration & Production (E&P) companies in a favorable position. With Brent crude now trading at multi-month highs, the profitability of producers in the North Sea, West Africa, and the Americas is set to increase, provided prices remain elevated. The immediate challenge for the global market will be to navigate the disruption and reallocate supply chains to meet demand, a process that could keep energy prices buoyant in the near term.