Oil Prices Surge Over 5% on New US Sanctions Against Russia
Sanctions targeting Russian energy giants Rosneft and Lukoil spark fears of significant global supply disruptions, threatening crude flows to major importers like India and China.
Global oil prices jumped more than 5% on Thursday after the United States announced a new round of stringent sanctions against Russia's largest energy producers, sparking immediate fears of a significant tightening in global crude supply.
Brent crude, the international benchmark, climbed approximately 5.7% to settle around $66.13 per barrel, its largest single-day gain in over a month. The move followed a White House announcement detailing new economic restrictions targeting Russian state-controlled oil giants Rosneft and Lukoil. The sanctions are designed to cripple a key revenue stream for Moscow and are expected to have wide-ranging effects on global energy flows.
The surge in crude prices provided a strong lift to the energy sector. Shares of Exxon Mobil (XOM) rose 1.11% in afternoon trading, while rival Chevron (CVX) saw its stock climb 0.64%. The rally reflects investor bets that sustained higher oil prices will directly boost the profitability of major producers.
The sanctions package threatens to remove a substantial volume of Russian oil from the market. According to analysts at the Atlantic Council, the move could take two to three million barrels of Russian crude off the market if major buyers comply. The core of the issue lies with secondary sanctions, which could penalize international firms and financial institutions that continue to do business with the targeted Russian entities.
This has already begun to impact purchasing decisions from some of the world's largest energy consumers. Bloomberg reported that oil flows from Russia are set to drop as key importers reassess their relationships. Major state-owned oil companies in China and India's Reliance Industries have reportedly suspended new seaborne purchases of Russian crude, according to market sources.
Since the invasion of Ukraine, India has become a primary buyer of Russian seaborne crude, taking advantage of discounted prices. A halt in these purchases would force India to seek alternative supplies from the Middle East and Africa, likely at higher prices, potentially stoking inflation in the world's third-largest oil importer.
In a defiant statement, Russian President Vladimir Putin stated he would "never bow" to U.S. pressure but conceded the sanctions could cause "some losses," as reported by The Guardian. The sanctions also sent a chill through Russian financial markets, with the MOEX Russia Index falling as much as 3.6% following the announcement.
Market participants will now be closely watching for potential responses from OPEC+ and whether other nations release strategic petroleum reserves to offset the supply shock. However, the immediate market reaction signals a clear expectation: the global energy map is being redrawn, and higher prices are the first consequence.