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Oil jumps as new US sanctions to curb Russian supply to China, India

Oil jumps as new US sanctions to curb Russian supply to China, India

Oil prices extended gains for a third session on Jan 13, with Brent rising above US$81 a barrel to its highest in more than four months, as wider US sanctions are expected to affect Russian crude exports to top buyers China and India.


Brent crude futures climbed US$1.47, or 1.84 per cent, to US$81.23 a barrel by 0503 GMT after hitting an intraday high of US$81.49, the highest since Aug 27.


US West Texas Intermediate crude rose US$1.55, or 2.02 per cent to US$78.12 a barrel after touching a high of US$78.39, the most since Oct 8.


Brent and WTI have risen by more than 6 per cent since Jan 8 and both contracts surged after the US Treasury imposed wider sanctions on Russian oil on Jan 10.


The new sanctions included producers Gazprom Neft and Surgutneftegas, as well as 183 vessels that have shipped Russian oil, targeting the revenue Moscow has used to fund its war with Ukraine.


Russian oil exports will be hurt severely by the new sanctions, pushing China and India, the world’s top and third largest oil importers respectively, to source more crude from the Middle East, Africa and the Americas, which will boost prices and shipping costs, traders and analysts said.


Goldman Sachs analysts estimated that the vessels targeted by the new sanctions transported 1.7 million barrels a day of oil in 2024 or 25 per cent of Russia’s exports, with the vast majority being crude oil.


RBC Capital Markets analysts said the doubling of tankers sanctioned for moving Russian barrels could serve as a major logistical headwind to crude flows.


Many of the tankers named in the latest sanctions have been used to ship oil to India and China as previous Western sanctions and a price cap imposed by the Group of Seven countries in 2022 shifted trade in Russian oil from Europe to Asia. Some of the ships have also moved oil from Iran, which is also under sanctions.


JPMorgan analysts said Russia had some room to manoeuvre despite the new sanctions, but it would ultimately need to acquire non-sanctioned tankers or offer crude at or below US$60 a barrel to use Western insurance as per the West’s price cap. 



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