Thursday saw a dramatic spike in oil prices following President Trump’s announcement of new sanctions targeting two major Russian oil firms. This move comes amid growing frustration from the Trump administration regarding President Vladimir V. Putin’s actions in the ongoing war in Ukraine.
The global benchmark, Brent crude, climbed by approximately 5.4 percent, nearing $66 per barrel. Simultaneously, European natural gas prices experienced a rise of over 3 percent. This occurred as the European Union simultaneously unveiled its own set of sanctions against Russia, which notably feature a ban on importing Russian liquefied natural gas (LNG) starting in 2027.
According to Richard Bronze, who leads geopolitics at the research firm Energy Aspects, President Trump’s recent decisions will wield both symbolic and tangible influence on a market that had grown accustomed to the administration’s prior hesitation in sanctioning Russia.
“Simply making this announcement is poised to send a substantial shockwave across the market,” noted Mr. Bronze. “It appears the president has finally come to the realization that Putin will not offer concessions or engage in genuine diplomatic efforts without first experiencing considerable pressure.”
While Russia’s natural gas supply has faced restrictions, Moscow has largely managed to sustain its oil exports, often selling at reduced prices to nations like India and China. Analysts are now keenly observing whether President Trump possesses the resolve to intensify economic pressure on Russia.
Mr. Bronze suggested that the combined impact of Trump’s initiatives, alongside those from Britain and the European Union, is likely to ‘significantly affect Russian oil exports, especially those destined for India.’
He explained that Reliance Industries, India’s leading oil refiner, holds a substantial contract for Russian crude. Both Reliance and other Indian buyers are expected to ‘temporarily halt purchases until they gain a clearer understanding of how these new sanctions will be implemented.’
As the second-largest importer, India typically buys between 1.6 to 1.8 million barrels of Russian crude daily. Mr. Bronze also indicated that China, Russia’s primary customer, and Turkey, its third largest, might also reduce their purchases in the coming weeks. Such delays could result in an increased volume of oil remaining stranded on tankers.
President Trump’s recent actions pose a threat to curtail a significant global source of crude oil. Russia’s daily oil exports are estimated by Mr. Bronze to be around 4.5 million barrels.
The U.S. sanctions specifically target Rosneft and Lukoil, Russia’s two largest oil producers. These companies had previously increased their export activities following January’s sanctions by the Biden administration on Gazprom Neft and Surgutneftegaz.
These sanctions are expected to create a ripple effect throughout the market as buyers of Russian crude seek alternative sources. Mr. Bronze projects that Brent crude prices could potentially climb toward $70 per barrel.
Recent months have seen oil prices face downward pressure due to concerns about an oversupply relative to demand. The situation was further complicated by the OPEC Plus cartel, comprising eight producing nations, which has been increasing oil output.
However, there remains uncertainty regarding the actual volume of surplus crude that might enter the market. Given OPEC Plus’s recent production increases, there is now notably less spare capacity or readily available additional oil to be produced.
Since Russia’s 2022 invasion of Ukraine, both the United States and Europe have undertaken significant efforts to curb Moscow’s revenue from oil and natural gas sales, which are deemed essential for funding its ongoing military operations.