Oil prices rallied more than four per cent on Friday to reach their highest levels since October as traders focused on potential supply disruptions from more sanctions on Russia.
Brent crude futures gained $3.50, or 4.6 per cent, to $80.42 a barrel by 1422 GMT, reaching $80 a barrel for the first time since Oct.7. U.S. West Texas Intermediate crude futures advanced $3.57, or 4.8 per cent, to $77.49.
The United States will impose some of the harshest sanctions on the Russian oil industry to date, designating 180 vessels, dozens of traders, two major oil companies and some top Russian oil executives, a document seen by Reuters said.
The sanctions target Russian oil companies Gazprom Neft and Surgutneftegas and their subsidiaries, more than 180 tankers, and more than a dozen Russian energy officials and executives. The sanctioned executives include Gazprom Neft CEO Aleksandr Valeryevich Dyukov.
The sanctioned vessels are mostly oil tankers that are part of Russia’s “shadow fleet” that has dodged existing sanctions on the country’s energy exports, according to the Treasury Department.
“The United States is taking sweeping action against Russia’s key source of revenue for funding its brutal and illegal war against Ukraine,” Treasury Secretary Janet Yellen said in a statement.
“With today’s actions, we are ratcheting up the sanctions risk associated with Russia’s oil trade, including shipping and financial facilitation in support of Russia’s oil exports,” Yellen said.
The perception in the oil market is Indian and Chinese refiners that have imported Russian oil will have to scramble for barrels from the Middle East, said Bob Yawger, executive director of energy futures at Mizuho Securities, in a note to clients on Friday.
The Biden administration has sought to ratchet up pressure on Russia and dispense aid to Ukraine before President-elect Donald Trump takes office.
“The Biden administration opted for more robust energy sanctions, which caught the oil market especially complacent about sanctions risks,” said Bob McNally, president of Rapidan Energy Group.
“Therefore, we expect today’s material risk premium in Brent to stick to pending signals from the Trump team as to whether they will continue these sanctions,” McNally said.
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