Oil Prices Surge Amid Sanctions: Ripples in Global Markets

Oil prices jumped nearly 5% after U.S. sanctions on Russian suppliers Rosneft and Lukoil due to Russia's actions in Ukraine. The sanctions are expected to tighten global oil supply. Brent and WTI futures reached two-week highs, and China's and India's refiners are now seeking alternative oil sources.

Oil prices surged by approximately 5% to reach a two-week high as the U.S. imposed sanctions on major Russian oil suppliers, Rosneft and Lukoil. These sanctions, a response to Russia's ongoing conflict in Ukraine, could significantly reduce the oil available on global markets, given Russia's ranking as the world's second-largest crude producer behind the U.S. in 2024.

Brent futures saw an increase of $2.91, or 4.7%, per barrel, and U.S. West Texas Intermediate crude rose by $2.89, or 4.9%. These increases pushed Brent and WTI towards achieving their highest closing prices since early October. The impact was further intensified by U.S. diesel futures rising over 5%, causing a spike in refining profit margins.

In response to these developments, Chinese state oil companies have halted purchases from the sanctioned Russian firms, propelling prices higher. Meanwhile, the U.S. has indicated its readiness to introduce additional sanctions should Moscow not cease its military actions in Ukraine. Analysts suggest the true impact of these sanctions will hinge on India's response and Russia's ability to find new markets for its crude.

(With inputs from agencies.)