Oil prices are surging this morning, as WTI reaches three-month highs following reports that Indian oil refiners are preparing for new US sanctions that could impact flows from Russia.
“Additional sanctions against the Russian oil and insurance industry have added more fuel to the fire, raising the possibility of reduced supply during a period of high winter demand,” said Ole Hansen, head of commodities strategy at Saxo Bank.
While traders were expecting stricter sanctions, the magnitude of the measures is much larger than anticipated. The stricter measures will target over 180 tankers carrying Russian oil, as well as maritime insurance providers based in the country, according to Reuters, citing Indian refining sources.
WTI has surpassed its 200DMA – driving a further increase in price as CTAs join the trend…
Source: Bloomberg
The market is also being supported by decreasing US crude inventories, reduced seaborne exports from Russia, and cold weather.
“The cold snap in the US and Europe could disrupt supply if refiners are impacted and demand for heating oil rises naturally. Stock draws in distillates in the upcoming weeks cannot be discounted. Sanction-related decreases in Iranian and Russian crude oil exports are pushing China to search for suitable alternatives,” noted PVM Oil Associates.
The uncertainty surrounding how aggressively the Trump administration will act to limit Iranian crude flows is also providing support, according to experts.
Asian buyers are already seeking alternative grades from the Middle East, with broader sanctions against Russia and Iran complicating the oil flow.
“Sentiment remains positive due to colder weather in parts of the Northern Hemisphere, which is expected to boost oil demand. Additionally, spot Asian LNG (liquefied natural gas) is trading at a premium to oil, increasing the risk of substitution,” noted commodities strategists Warren Patterson and Ewa Manthey from ING.
These additional sanctions come after a major Chinese port operator’s decision this week to prohibit sanctioned tankers from Russia and Iran.
With oil prices on the rise, keep an eye on pump prices…
Source: Bloomberg
It is interesting that the Biden administration chose now to intensify anti-Russian sanctions.. just as Trump’s term is set to begin, reigniting concerns about inflation.
Loading…