Oil prices near five-month high amid US sanctions on Russia

Oil prices hovered near a five-month high as concerns over global supply disruptions grew due to stricter US sanctions on Russian oil exports and potential trade tariffs under the incoming Trump administration.

Brent edged lower toward $80 a barrel, after surging by more than 5% over the previous two sessions, while WTI was near $78, News.Az reports, citing Bloomberg.

The US imposed its most aggressive sanctions yet on Russia’s oil industry on Friday, targeting key exporters, insurance companies and more than a 150 tankers. At the same time, 10 European nations are also pushing for tougher curbs.

In Canada, meanwhile, Alberta Premier Danielle Smith warned of possible US tariffs once Donald Trump assumes the presidency next week, with no exemptions for oil, after meeting the president-elect in Florida. More than half of US crude imports come from Canada, most of it from Alberta.

Crude has seen a strong start to the year as the multiplying supply risks deliver a further boost to a market that had already been lifted by falling US stockpiles and colder weather fanning demand. While the full impact of the latest US sanctions package remains far from clear, it may drive a rerouting of global flows as users across Asia, including refiners in India and China, are forced to reach far and wide for replacement barrels.

“There is still plenty of uncertainty over how much of an impact the latest US sanctions will have on Russian oil exports,” said Warren Patterson, head of commodities strategy at ING Groep NV. “While they have the potential to wipe out the surplus we expect for this year, the actual volumes lost will likely be more limited as players find ways to circumvent these sanctions.”

Some early signs of disruption are already apparent. Among them, a senior Indian bureaucrat told reporters that sanctioned vessels won’t be allowed to discharge, and tanker rates have jumped as the curbs threaten to cut the supply of ships. In the physical market, Chinese buyers snapped up prompt supplies of crude from the United Arab Emirates and Oman in a tender.

Widely tracked metrics point to a fast-tightening market. Brent’s prompt spread — the difference between its two nearest contracts — wass at $1.27 barrel in backwardation, a bullish pattern. That compares with a gap of 40 cents at the end of last year.

Russian sanctions and winter demand are “fueling momentum in oil prices and there could be further runway here,” said Charu Chanana, chief investment strategist for Saxo Markets Pte in Singapore, citing expectations for Trump tightening sanctions against Iran. “We expect WTI to potentially reach $85 in the near term, even as rising non-OPEC+ production and slowing demand from China could limit upside from there.”

News.Az