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Oil prices surge toward biggest weekly gain since June
Oil prices have soared to their highest weekly increase in nearly five months, driven by fresh sanctions from the United States and the European Union against Russia's largest oil companies. The measures have sparked fears of supply disruptions, pushing crude futures up by over 5% on Thursday.
Brent crude closed near $66 per barrel, while West Texas Intermediate (WTI) settled at $61.79, marking their largest single-day gains since mid-June. Both benchmarks are on track to post weekly gains of approximately 7%, their best performance since early June.
Sanctions target Russian energy giants
The Trump administration introduced sweeping sanctions on Wednesday against Rosneft and Lukoil, Russia’s two largest oil producers. Together, these companies account for nearly half of the country’s crude exports. The sanctions bar U.S. entities from conducting financial transactions with the companies and freeze their American assets.
"Given President Putin's refusal to end this senseless war, the Treasury is sanctioning Russia's two largest oil companies that fund the Kremlin's war machine," said Treasury Secretary Scott Bessent. These measures represent a significant escalation compared to earlier price cap-focused sanctions, directly targeting major producers for the first time.
Meanwhile, the European Union unveiled its 19th sanctions package against Russia. This includes a ban on Russian liquefied natural gas (LNG) imports, effective January 1, 2027, for long-term contracts and within six months for short-term agreements.
Global supply chains feel the impact
The sanctions have immediately disrupted global oil flows as buyers scramble to adapt their procurement strategies. Chinese state-run oil giants, including Sinopec, PetroChina, and CNOOC, announced a halt to short-term purchases of Russian crude.
Indian refiners, led by Reliance Industries, are also preparing to significantly cut Russian oil imports. "There will be a massive reduction," a refining industry source told Reuters. India, which became the largest buyer of Russian crude in 2022, currently imports around 1.62 million barrels per day.
Concerns over pump prices
Analysts warn that U.S. consumers may face rising gasoline prices in the coming days as the sanctions ripple through the market. "We’ll likely start seeing drivers impacted at the pump in the next few days," said Patrick De Haan, head of petroleum analysis at GasBuddy. However, he expects the impact to be temporary, depending on diplomatic developments.
The sanctions come as oil prices were relatively subdued, with U.S. crude benchmarks recently falling below $57 per barrel, their lowest levels since early 2021. Kuwait’s oil minister signaled that OPEC is ready to boost production if market conditions demand it.