Oil Prices Dip, but Supply Fears Keep Market on Track for Weekly Gain
Oil prices edged lower in early trading on Friday, easing part of the previous day’s strong rally but still staying on course for a solid weekly gain. The decline came as traders assessed the impact of new U.S. sanctions on Russia’s two largest oil companies, which reignited fears of tighter global supply amid the ongoing war in Ukraine.
Crude Prices Ease After Thursday’s Surge
Brent crude futures slipped 41 cents, or 0.62%, to $65.58 per barrel at 06:53 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude fell 38 cents, or 0.61%, to $61.41.
“Crude is levelling off, and some profit-taking is setting in, showing the market isn’t hitting the panic button over Russian supply,” said Vandana Hari, founder of Vanda Insights. She added that traders appear to be in a “wait-and-watch mode” for the next development — whether escalation or de-escalation — with markets currently betting on the latter.
Both benchmarks jumped more than 5% on Thursday and were on track for roughly a 7% weekly gain, marking the biggest rise since mid-June.
Supply Concerns Drive Market Sentiment
The six-month spread for both Brent and WTI futures returned to backwardation, where near-term contracts trade higher than later-dated ones. This shift signals renewed concern over supply shortages, as traders prefer to sell oil now rather than pay for storage.
US Sanctions Target Russia’s Rosneft and Lukoil
On Thursday, President Donald Trump announced sanctions against Rosneft and Lukoil in an effort to pressure Russian President Vladimir Putin to end the war in Ukraine. Together, these companies produce over 5% of global crude output, making the sanctions highly impactful on supply dynamics.
Following the move, Chinese state oil majors temporarily halted Russian crude purchases, while Indian refiners, the top buyers of seaborne Russian oil, signaled steep cuts in imports. “Flows to India are at particular risk,” noted Janiv Shah, Vice President at Rystad Energy, though he added that Chinese refiners may face fewer disruptions due to diversified supply sources and stockpiles.
OPEC and Global Response
Kuwait’s oil minister said OPEC stands ready to increase output to offset any shortages in the market. The U.S. government warned it could take additional measures if necessary.
In response, Putin dismissed the sanctions as an “unfriendly act,” arguing that they would not significantly damage the Russian economy while reaffirming Russia’s role as a major player in the global energy market.
The United Kingdom also imposed restrictions on Rosneft and Lukoil last week, and the European Union approved its 19th sanctions package, banning imports of Russian liquefied natural gas (LNG). The EU additionally targeted two Chinese refiners with a combined capacity of 600,000 barrels per day and added Chinaoil Hong Kong, a PetroChina affiliate, to its sanctions list.
According to U.S. energy data, Russia was the world’s second-largest crude oil producer in 2024, following the United States.
Trump–Xi Meeting in Focus
Investors are also eyeing next week’s meeting between President Donald Trump and Chinese President Xi Jinping in Seoul. The talks aim to ease long-standing trade tensions between the two superpowers and could influence future demand expectations for oil and commodities.
