Agencies
New York
International crude oil prices rallied nearly three percent to hit their highest in three months in the previous session after commodity traders braced for supply disruptions from the broadest US sanctions package targeting Russian oil and gas revenue amid the ongoing military attacks on Ukraine.
Brent crude futures settled at $79.76 a barrel, up $2.84, or 3.7 percent, after crossing $80 a barrel for the first time since October 7, 2024. US West Texas Intermediate (WTI) crude futures rose $2.65, or 3.6 percent, to settle at $76.57 per barrel on January 10, 2025, which was also a three-month high.
Both crude contracts were up more than four percent at their session high after European and Asian traders circulated an unverified document detailing the sanctions. Back home, crude oil futures last settled 3.14 percent higher at approximately $79.06 per barrel on the multi-commodity exchange (MCX).
US President Joe Biden’s administration imposed fresh sanctions on Russian oil producers, tankers, intermediaries, traders, and ports this week, aiming to affect every stage of Moscow’s oil production and distribution chains.
Sources in Russian oil trade and Indian refining told news agency Reuters that the sanctions would severely disrupt Russian oil exports to its major buyers, India and China. The sanctions will cut Russian oil export volumes and make them more expensive.
US ultra-low sulfur diesel futures, previously called the heating oil contract, rose 5.1 percent to settle at $105.07 per barrel, the highest since July. Analysts say India and China are scrambling right now to find alternatives.
Their timing of the sanctions, just a few days before President-elect Donald Trump’s inauguration, makes it likely that Trump will keep the sanctions in place and use them as a negotiating tool for a Ukraine peace treaty.
Oil prices were also buoyed as extreme cold in the US and Europe has lifted demand for heating oil. “We anticipate a significant annual increase in global oil demand of 1.6 million barrels a day in the first quarter of 2025, boosted by demand for heating oil, kerosene, and LPG,” JPMorgan analysts said in a note on Friday.
Expectations of increased demand boosted crude oil futures. Prolonged colder temperatures in the Northern Hemisphere are expected to increase heating fuel consumption. A report showing a seventh consecutive weekly decline in US crude stockpiles suggests strong demand. However, gains were hampered by weak demand in China, where inflation is approaching zero, and a stronger US dollar, making oil less appealing to international buyers.
“Russia’s seaborne oil exports have dropped to their lowest level since August 2023, raising supply concerns. We expect crude oil prices to remain volatile.
Crude oil has support at $73.05-72.50 and resistance is at $74.20-74.90. In dollars, crude oil has support at approximately $76.06-$75.27 and resistance at $78.00-$79.38,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
Oil prices have continued their merry run since the beginning of the new year on the back of increased concerns over supply disruptions.
Oil benchmarks have climbed more than $5 per barrel since the close of December 31.
The optimism has been supported by further sanctions on Russian crude oil exports and tankers carrying oil from the country.
Over the last couple of weeks, less oil has been made available to the market, especially to India and China. Both Asian countries have been the top buyers of Russian oil since 2022.
As crude has been less available from Russia, buyers have turned to the Middle Eastern markets over the last few weeks.
This has generated more demand for Middle Eastern grades, while tightening the spot market in the likes of Saudi Arabia, the United Arab Emirates and Iraq.
The question now remains, how far can oil prices climb?
David Morrison, senior market analyst at Trade Nation said, “While the immediate fundamentals are quite different now compared to the summer, it shouldn’t be a surprise to see some sort of pullback and consolidation. At the same time, markets can continue to run at overbought, or oversold, levels for much longer than often seems reasonable.”
According to Commerzbank AG, oil exports from the UAE and Russia were significantly reduced in December.
“In addition, the sanctions were apparently implemented more strictly,” Barbara Lambrecht, commodity analyst at Commerzbank, said.
Experts believe that the western sanctions against the Russian shadow fleet are having an effect.
