Oil sizzles to 3-month high after US imposes tougher sanctions on Russian crude; Brent rallies 4% to touch $80

International crude oil prices rallied nearly three per cent 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 per cent, 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 per cent, to settle at $76.57 per barrel on January 10, 2025, which was also a three-month high. 

Also Read: Brent crude outlook bearish on oversupply, grim oil demand; 2025 average pegged at $74 after hitting $80 in 2024

Both crude contracts were up more than four per cent 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 per cent higher at ₹6,572 per barrel on the multi-commodity exchange (MCX). 

Brent hits 3-month high: What’s driving crude oil prices?

-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.

Also Read: Morgan Stanley, HSBC slash crude oil supply forecast; Brent average pegged near $70 for 2025 after OPEC+ verdict

-US ultra-low sulfur diesel futures, previously called the heating oil contract, rose 5.1 per cent 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.

Also Read: India’s oil demand growth to top China’s in 2024, trend to continue next year: S&P

Where are prices headed?

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 INR crude oil has support at ₹6,320-6,250 while resistance at ₹6,480-6,540,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

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