NEW YORK: Oil prices climbed about 2% to a four-month high on Monday on expectations that wider US sanctions on Russian oil would force buyers in India and China to seek other suppliers. Brent futures rose $1.40, or 1.8%, to $81.16 a barrel by 11:18 a.m. EST (1618 GMT), while US West Texas Intermediate (WTI) crude rose $2.15, or 2.8%, to $78.72.
That put Brent on track for its highest close since Aug. 26 and WTI on track for its highest close since Aug. 12, and kept both benchmarks in technically overbought territory for a second day in a row.
Moreover, with Brent and WTI front-month prices rising around 7% over the past three trading sessions, the premium of front-month contracts over later-dated futures, known in the energy industry as time spreads, soared to their highest in several months.
The US Treasury imposed wider sanctions on Russian oil producers late last week, including Gazprom Neft and Surgutneftegaz, as well as 183 vessels that have shipped Russian oil, targeting revenue Moscow has used to fund its war with Ukraine. Analysts and energy traders said the sanctions will push China and India to source more crude from the Middle East, Africa and the Americas, boosting prices and shipping costs.
“There are genuine fears in the market about supply disruption. The worst case scenario for Russian oil is looking like it could be the realistic scenario,” said PVM analyst Tamas Varga. “But it’s unclear what will happen when Donald Trump takes office next Monday.” Goldman Sachs estimated that vessels targeted by the new sanctions transported 1.7 million barrels per day (bpd) of oil in 2024, or 25% of Russia’s exports.
The bank is increasingly expecting its projection for a Brent range of $70-$85 to skew to the upside. “No one is going to touch those vessels on the sanctions list or take new positions,” said Igho Sanomi, founder of oil and gas trading company Taleveras Petroleum. At least 65 oil tankers have dropped anchor at multiple locations, including off the coasts of China and Russia, since the US announced the new sanctions package.
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