Oil Prices Surge 5% After U.S. Sanctions Russian Giants Rosneft and Lukoil
Oil prices surged nearly 5% on Thursday, reaching a two-week high after the United States imposed sanctions on Russian energy majors Rosneft and Lukoil in response to Moscow’s ongoing war in Ukraine.
According to U.S. energy data, Russia was the world’s second-largest crude producer in 2024, behind only the U.S., meaning the sanctions could tighten global oil supply.
Crude and Diesel Prices Jump
Brent crude futures rose $2.91, or 4.7%, to $65.50 per barrel at 10:51 a.m. EDT (1451 GMT), while U.S. West Texas Intermediate (WTI) climbed $2.89, or 4.9%, to $61.39. Brent is now on pace for its highest close since October 8, while WTI is set for its highest since October 9.
U.S. diesel futures also spiked over 5%, pushing the diesel crack spread—a key measure of refining margins—to its strongest level since February 2024.
China and India Reassess Russian Imports
Several Chinese state oil companies have reportedly suspended purchases of seaborne Russian crude from Rosneft and Lukoil following the U.S. sanctions, according to multiple Reuters sources. This move added further upward pressure on oil prices.
However, prices eased slightly after Kuwait’s oil minister said the OPEC alliance is ready to offset any global shortages by adjusting production levels.
Analyst Ole Hansen of Saxo Bank said the sanctions will force refineries in China and India—two of Russia’s biggest oil buyers—to seek alternative suppliers to avoid being cut off from the Western financial system.
More Sanctions from Western Allies
The U.K. also sanctioned Rosneft and Lukoil last week, while the European Union approved its 19th package of sanctions against Russia, including a ban on Russian LNG imports. The EU also blacklisted two Chinese refiners with a combined capacity of 600,000 barrels per day, as well as Chinaoil Hong Kong, a PetroChina trading arm.
UBS analyst Giovanni Staunovo noted that the market impact will depend largely on India’s reaction and whether Russia can find new buyers for its crude. India has become the largest importer of discounted Russian oil since the war began.
Industry sources said Indian refiners, including Reliance Industries, are now preparing to cut or suspend Russian imports to comply with the new measures.
Analysts Question Long-Term Impact
Despite the rally, some analysts remain skeptical about how deeply the sanctions will affect supply. Rystad Energy analyst Claudio Galimberti said previous rounds of sanctions failed to meaningfully reduce Russia’s output or revenues.
Concerns over potential oversupply—following OPEC+ production increases—also capped crude’s gains. UBS expects Brent prices to remain between $60 and $70 per barrel in the short term.
Meanwhile, on the demand side, U.S. data showed crude, gasoline, and distillate inventories fell last week amid stronger refining activity and consumption, according to the Energy Information Administration (EIA).
U.S.–China Talks to Ease Market Tensions
Separately, Chinese Vice Premier He Lifeng is expected to meet U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer starting Friday. The discussions aim to cool trade tensions between the world’s two largest economies ahead of a key leaders’ summit.
