Oil prices jumped 3% on Thursday, extending gains from the previous session, as India buyers started reviewing their Russian oil purchases after the U.S. imposed sanctions on major suppliers Rosneft and Lukoil over the Ukraine war.
Brent crude futures were up by $1.94, or 3.1%, at $64.53 per barrel by 0428 GMT, while U.S. West Texas Intermediate crude futures were up $1.89, or 3.2%, at $60.39.
The U.S. said it was prepared to take further action as it called on Moscow to agree immediately to a ceasefire in its war in Ukraine.
Britain sanctioned Rosneft and Lukoil last week. Separately, EU countries approved a 19th package of sanctions against Russia for the war that includes a ban on imports of Russian LNG.
“President Trump’s fresh sanctions hitting Russia’s biggest oil houses aim squarely at choking Kremlin war revenues – a move that could tighten physical flows of Russian barrels and force buyers to re-route volumes onto the open market,” said Phillip Nova’s senior market analyst Priyanka Sachdeva.
Right after the U.S. sanctions were announced, Brent and WTI futures rose by more than $2 a barrel, boosted as well by a surprise decline in US stockpiles.
“If New Delhi trims purchases under U.S. pressure, we could see Asian demand pivot toward U.S. crude, lifting Atlantic prices,” she added.
India state refiners said they were reviewing their purchases of Russian oil barrels to ensure that no supply will be coming directly from Rosneft and Lukoil after the U.S. slapped sanctions on them.
Meanwhile, privately-owned Reliance Industries – India’s largest buyer of Russian oil – said it is planning to adjust crude imports from Moscow to align with guidelines from the Indian government.
Sources said Reliance plans to sharply cut Russian oil imports due to EU and US sanctions, with other Indian refiners likely to make massive reductions as well.
But scepticism in the market as to whether the U.S. sanctions would lead to a real fundamental supply-demand shift limited oil’s gains.
“The new sanctions are certainly upping the ante between US and Russia but I see the oil price jump more like a knee-jerk reaction by the markets rather than a structural shift,” said Rystad Energy’s global market analysis director, Claudio Galimberti.
“So far, almost all the sanctions against Russia for the past 3.5 years have mostly failed to dent either the volumes produced by the country or the oil revenues,” he said, adding that some buyers of Russian oil in India and China had been continuing their purchases.
In the near-term, markets were eyeing a surplus in OPEC+ supplies, due to unwinding production cuts, to be a key price driver.
“The three factors I will be watching going into Nov are OPEC+ unwinding, China’s crude stockpiling, and the wars in Ukraine and Mid-east, in this order,” said Galimberti.
