Oil prices rally 3% as US hits Russian oil with tougher sanctions

Oil prices rallied nearly 3% to their highest in three months on Friday as traders braced for supply disruptions from the broadest US sanctions package directed at Russian oil and gas revenue. President Joe Biden's administration imposed fresh sanctions targeting Russian oil producers, tankers, intermediaries, traders and ports, aiming to hit every stage of Moscow's oil production and distribution chains. Brent crude futures settled at $79.76 a barrel, up $2.84, or 3.7%, after crossing $80 a barrel for the first time since October7. US West Texas Intermediate crude futures rose $2.65, or 3.6%, to settle at $76.57 per barrel, also a three-month high.

The sanctions will cut Russian oil export volumes and make them more expensive. Their timing, just a few days before President-elect Donald Trump's inauguration, makes it likely that Trump will keep the sanctions in place and use them as a negotiating tool for a Ukraine peace treaty. Oil prices were also buoyed as extreme cold in the US and Europe has lifted demand for heating oil. US ultra-low sulfur diesel futures rose 5.1% to settle at $105.07 per barrel, the highest since July. Meanwhile, US energy firms last week cut the number of oil rigs operating for the first time in six weeks, energy services firm Baker Hughes said in its report on Friday. The oil rig count, an early indicator of future output, fell by 2 to 480 in the week to January 10, the lowest since November.
Gas

Asian spot LNG prices fell last week from a one-month high, amid weak demand ahead of the Lunar New Year holiday in Asia, healthy stocks and as recent high prices kept some buyers at bay. The average LNG price for February delivery into north-east Asia was $14.00 per mmBtu, down from $14.60 last week. Spot gas prices in Europe and in Asia have dropped back from their highs at the start of the month, as the market has absorbed the shutdown of Russia-Ukraine pipe flows. The high price levels over the past weeks have kept price sensitive buyers in both China and India away from the spot market. With stocks still relatively well-filled and not much economic improvement given the latest numbers on Chinese industrial production and inflation, it seems clear that some portfolio managers must be well-prepared for the second half of the winter, an analyst said. In Europe, LNG delivered prices fell last week from a one-year high the previous week. However, the inter-basin arbitrage, moving cargos from one market to another, has held firmly shut, with at least two cargoes diverting in the mid-Atlantic to Europe last week as Asian buyers are not competing for Atlantic basin supply. In the US, natural gas futures soared about 8% to a two-year high on Friday on forecasts for colder weather and higher heating demand over the next two weeks than previously expected, and record gas flows to LNG export plants.
This article was supplied by the Abdullah bin Hamad Al-Attiyah International Foundation for Energy and Sustainable Development.