Both Brent and WTI oil rose to their highest level since early October, after the US imposed the largest sanctions on Russian oil and gas.
Closing the trading session on January 10, Brent crude oil price increased 3.7% to 79.7 USD per barrel. This is the highest level since early October. During the session, the price at one point rose to 80.63 USD – the first time it surpassed this mark since October 7.
WTI crude oil price also increased by 3.6% to 76.5 USD. This is also the highest level in 3 months.
An oil tanker belonging to Sovcomflot (Russia) passes through the Bosphorus Strait (Türkiye) in September 2020. Photo: Reuters
The market went up because investors predicted oil supply disruptions after the US imposed the largest sanctions on Russian oil and gas. On January 10, the administration of US President Joe Biden imposed new sanctions targeting Russian oil companies, tankers, intermediaries, traders and seaports. This will hit every step of the Russian oil production process and supply chain.
Sources from Russia and India said above Reuters that sanctions will seriously disrupt Russian oil exports to major buyers India and China.
“India and China are urgently looking for alternatives,” Anas Alhajji – Director of energy consulting firm Energy Outlook Advisors said on social network X. Giovanni Staunovo – analyst at UBS said that sanctions will reduce the amount of Russian oil exports and make this product more expensive.
The US move took place just 10 days before President-elect Donald Trump took office. Mr. Trump is expected to keep these sanctions in place and may use them as a peace negotiation tool for Ukraine, Staunovo predicted.
Oil prices also increased due to cold weather in the US and Europe, leading to increased demand for heating, said Alex Hodes – analyst at brokerage firm StoneX. Europe has been promoting renewable energy for many years. However, wind power has so far only contributed about 20% of electricity consumption in this area.
“We forecast that in the first quarter, global oil demand will increase by 1.6 million barrels a day compared to last year, mainly because of heating demand,” said analysts at JPMorgan.