Oil prices surged around 5% to a two-week high on Thursday after the U.S. imposed sanctions on major Russian suppliers Rosneft and Lukoil over Moscow’s war in Ukraine, prompting energy firms in China and India to consider cutting Russian imports.

Brent futures rose $3.40, or 5.4%, to settle at $65.99 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $3.29, or 5.6%, to settle at $61.79.

Those were the biggest daily percentage gains for both crude contracts since mid-June and their highest closes since October 8.

“The announcement of sanctions by the U.S. on Rosneft and Lukoil is a major escalation in the targeting of Russia’s energy sector and could be a big enough shock to flip the global oil market into a deficit next year,” said David Oxley, chief climate and commodities economist at Capital Economics.

Russia was the world’s second-biggest crude oil producer in 2024 after the U.S., according to U.S. energy data.

In addition to soaring crude prices, U.S. diesel futures jumped almost 7%, boosting the diesel crack spread to its highest since February 2024. Crack spreads measure refining profit margins.

The U.S. sanctions mean refineries in China and India, major buyers of Russian oil, will need to seek alternative suppliers to avoid exclusion from the Western banking system, said Saxo Bank analyst Ole Hansen.

Multiple trade sources told Reuters that Chinese state oil majors have suspended purchases of seaborne Russian oil from the two companies now under U.S. sanctions, providing a further boost to prices.

Kuwait’s oil minister said that the Organization of the Petroleum Exporting Countries (OPEC) would be ready to offset any shortage in the market by rolling back output cuts.

Russian President Vladimir Putin, however, said it will take time for the global market to replace Russian oil.

“This is, of course, an attempt to put pressure on Russia,” Putin added. “But no self-respecting country and no self-respecting people ever decides anything under pressure.

The U.S. said it was prepared to take further action as it called on Moscow to agree immediately to a ceasefire in Ukraine.

“The various U.S. and EU sanctions thus far have had essentially no effect on Russia’s ability to export oil, so we doubt that this latest round will be game-changing. That said, the Kremlin may need to use more intricate methods to ship its oil covertly, thereby increasing costs,” said Pavel Molchanov, investment strategy analyst at Raymond James.

Molchanov noted the U.S. investment bank would “continue keeping an eye on this issue” since Russian exports account for about 7% of global oil supply.

MORE SANCTIONS

Britain sanctioned Rosneft and Lukoil last week and the European Union has approved a 19th package of sanctions against Russia that includes a ban on imports of Russian liquefied natural gas.

The EU also added two Chinese refiners with combined capacity of 600,000 barrels per day (bpd), as well as Chinaoil Hong Kong, a trading arm of PetroChina, to its Russia sanctions list, its Official Journal showed on Thursday.

The impact of sanctions on oil markets will depend on how India reacts and whether Russia finds alternative buyers, said UBS analyst Giovanni Staunovo.

Refiners in India, which became the largest buyer of discounted seaborne Russian crude in the aftermath of the war in Ukraine, were poised to sharply curtail imports of Russian oil to comply with new U.S. sanctions on Lukoil and Rosneft, industry sources said on Thursday, potentially removing a major hurdle to a trade deal with the U.S.

Privately owned Reliance Industries, the top Indian buyer of Russian crude, plans to reduce or halt such imports completely, according to two sources familiar with the matter. (Reuters)

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Oil prices fell on Tuesday on concerns about excess supply and risks to demand stemming from tensions between the U.S. and China, the world’s top two oil consumers, even as President Donald Trump said he expected to reach a trade deal.

Brent crude futures fell 14 cents, or 0.2%, at $60.87 a barrel at 0005 GMT. The U.S. West Texas Intermediate crude (WTI) contract for November delivery, set to expire on Tuesday, eased 0.1% to $57.45. The more-active December contract was down 13 cents, or 0.2%, at $56.89.

U.S. President Donald Trump said on Monday he expects to reach a fair trade deal with Chinese President Xi Jinping. Disputes over tariffs, technology and market access remain unresolved ahead of their planned meeting in South Korea next week.

“I think we’ll end up with a very strong trade deal. Both of us will be happy,” Trump said.

Ritterbusch and Associates said in a note that the near-term trading stance on crude remains bearish, favoring selling into price advances rather than buying pullbacks.

“But, we also feel that enough geopolitical uncertainty remains to occasionally offset oil balances that are becoming more negative with each passing week,” they added.

U.S. crude oil stockpiles likely rose last week, a preliminary Reuters poll on Monday showed, ahead of weekly reports from the American Petroleum Institute and the Energy Information Administration.

In Russia, Rosneft-controlled Novokuibyshevsk refinery in the Volga region halted primary crude processing on Sunday following a drone attack. Separately, a strike on the Orenburg gas plant forced neighboring Kazakhstan to cut output at its Karachaganak oil and gas condensate field by 25% to 30%.

Ambiguity around Russian oil supply persists, as Trump reiterated that India could face “massive” tariffs unless it halts purchases of Russian crude. India has become the leading buyer of discounted Russian oil following Western sanctions on Moscow.

Oil prices have been falling partly due to a bearish outlook last week from the International Energy Agency, which projected the global oil market could face a surplus of nearly 4 million barrels per day in 2026, as OPEC+ producers and rivals ramp up output while demand remains sluggish. (Economic Times)

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Oil prices extended gains Monday as Israel and Iran pounded each other with missiles for a fourth day and threatened further attacks, stoking fears of a lengthy conflict that could reignite inflation.

Gold prices also rose back towards a record high thanks to a rush into safe havens, but while most equity markets dropped further into the red the losses were limited on hopes that the conflict does not spread through the  Middle East.

The dollar held its ground in choppy trading on Monday, as investors keenly monitored Israel-Iran fighting for any signs that it could escalate into a broader regional conflict and braced for a week packed with central bank meetings.

As both Iran and Israel showed no signs of backing off from their attacks, market participants mulled the prospect that Tehran might seek to choke off the Strait of Hormuz, the world’s most important gateway for oil shipping, which could raise broader economic risks from disruptions in the energy-rich Middle East.

Crude prices were up about one percent after closing seven percent higher on Friday following Israel’s preemptive strike on Iran.

On Monday, the dollar was flat at 144.08 Japanese yen after rising nearly 0.4 percent earlier in the session, while the euro was muted at $1.1555.

Investors were also gearing up for key central bank meetings this week, with a particular eye on the US Federal Reserve and Bank of Japan, as well as talks with Washington aimed at avoiding Donald Trump’s sky-high tariffs.

Israel’s surprise strike against Iranian military and nuclear sites on Friday, killing top commanders and scientists, sent crude prices soaring as much as 13 percent at one point on fears about supplies from the region.

Analysts also warned that the spike could send inflation surging globally again, dealing a blow to long-running efforts by governments and central banks to get it under control and fanning concerns about the impact on already fragile economies.

“The knock-on impact of higher energy prices is that they will slow growth and cause headline inflation to rise,” said Tony Sycamore, a market analyst at IG.

“While central banks would prefer to overlook a temporary spike in energy prices, if they remain elevated for a long period, it may feed through into higher core inflation as businesses pass on higher transport and production costs.

“This would hamper central banks’ ability to cut interest rates to cushion the anticipated growth slowdown from President Trump’s tariffs, which adds another variable for the Fed to consider when it meets to discuss interest rates this week.”

Both main oil contracts were up more than one percent in early Asian trade.

But Morningstar director of equity research Allen Good said: “Oil markets remain amply supplied with OPEC set on increasing production and demand soft. US production growth has been slowing, but could rebound in the face of sustained higher prices.

“Meanwhile, a larger war is unlikely. The Trump administration has already stated it remains committed to talks with Iran.

“Ultimately, fundamentals will dictate price, and they do not suggest much higher prices are necessary. Although the global risk premium could rise, keeping prices moderately higher than where they’ve been much of the year.”

Gold, a go-to asset in times of uncertainty and volatility, rose to around $3,450 an ounce and close to its all-time high of $3,500.

Also in focus is the Group of Seven summit in the Canadian Rockies, which kicked off on Sunday, where the Middle East crisis will be discussed along with trade in light of Trump’s tariff blitz.

Investors are also awaiting bank policy meetings, with the Fed and BoJ the standouts. (Arab weekly)

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The Sri Lankan government has approved a long-term contract for the procurement of six Murban crude oil tankers for the period from April 1, 2025, to August 31, 2025.

Bids for the procurement were invited from registered suppliers of the Ceylon Petroleum Corporation (CPC), with six bids received in response, the government said.

Following the evaluation by the Special Standing Procurement Committee appointed by the Cabinet, the proposal submitted by the Minister of Energy to award the contract to M/s Aditya Birla Global Trading (Singapore) Pte. Ltd. was approved. (Newswire)

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India, the world’s third biggest oil consumer and importer, plans to build its first commercial crude oil strategic storage as part of efforts to shore up stockpiles as insurance against any supply disruption. Indian Strategic Petroleum Reserves Ltd (ISPRL), a special purpose vehicle created by the government for building and operating strategic petroleum reserves in the country, has invited bids for constructing 2.5 million tonnes of underground storage at Padur in Karnataka, according to the to the tender document.

ISPRL had in the first phase built a strategic petroleum reserve in underground unlined rock caverns for storage of 5.33 million tonnes of crude oil at three locations Visakhapatnam (1.33 million tonnes) in Andhra Pradesh and Mangalore (1.5 million tonnes) and Padur (2.5 million tonnes) in Karnataka.

Under Phase-II, it intends to build a commercial cum strategic petroleum reserve in underground unlined rock caverns along with associated above ground facilities, including dedicated SPM and associated pipelines (offshore and onshore) for storage of 2.5 million tonnes of crude oil at Padur-II at a cost of Rs 5,514 crore.

The Phase-I storages were built at government expense.

In the tender, ISPRL said the Padur-II will be constructed in a PPP (public-private partnership) model where private parties will design, build, finance, and operate the storage.

Bidders have been asked to quote the financial grant they require for the building of the reserves or the premium/fee they want to offer to the authority.

The project will be awarded to entities that offer the highest premium. Where no bidder is offering a premium, it would go to the one seeking the lowest grant, the tender document said.

“Maximum quantum of grant to be quoted for the project shall be capped to Rs 3,308 crore,” ISPRL said. “A bidder who seeks a grant cannot offer any premium.”

The operator of Padur-II will lease out the storage to any oil company wishing to store oil and charge a fee. The companies storing oil can sell it to domestic refiners. But in case of an emergency, India will hold the first right on oil usage.

Bids are due by April 22 and the tender is to be awarded by June 27, the document said.

ISPRL is acquiring about 215 acres of land for Padur-II.

India, which meets over 85 per cent of its oil needs through imports, will use the strategic reserves in any emergency situation like supply disruption or war.

Of the Phase-I reserves, UAE’s Abu Dhabi National Oil Company (Adnoc) has hired half of the 2.5 million tonnes storage capacity at Padur and 1.5 million tonnes facility at Mangalore. While the remaining 1.25 million tonnes at Padur has been filed by ISPRL, the 0.75 million tonnes of vacant storage at Mangalore is to be leased out.

Out of the 1.33 million tonnes of storage built at Visakhapatnam, 0.33 million tonnes was a space that was built at the expense and for Hindustan Petroleum Corporation Ltd (HPCL). Of the remaining, HPCL has hired 0.3 million tonnes more and the rest of the storage is to be leased out.

The government had in the 2023-24 budget provided for Rs 5,000 crore for filling the vacant slots in the caverns but mid-year that plan was deferred. In the interim budget for 2024-25, presented in February, no allocation has been made for the purpose.

Companies like Adnoc use the strategic storages to hold oil for further sale to users.

Last month, the government allowed Adnoc to export crude oil it has stored in Mangalore reserves to give operational flexibility to the foreign firm.

In an order, the Ministry of Commerce and Industry on March 23 said the condition of export being allowed only through IOC will continue but “AMI (Adnoc Marketing International (India) RSC Limited India) is exempted from STE conditions and is allowed to re-export crude oil from their commercial stockpile at Mangalore strategic petroleum reserve, at their own cost.”

Adnoc had sought permission for the export of its oil from the cavern in cases where it could not find buyers in Indian refiners. (PTI)

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