Brent heats above $81, WTI in overbought territory after crude oil hits four-month high on Russian oil sanctions | Stock Market News

Global crude prices climbed about two per cent to hit a four-month high on Monday, January 13, driven by expectations that broader US sanctions on Russian oil would force buyers in India and China to seek other suppliers.

Brent futures rose $1.40, or 1.8 per cent, to $81.16 per barrel, while US West Texas Intermediate (WTI) crude rose $2.15, or 2.8 per cent, to $78.72. That put Brent on track for its highest close since August 26, 2024, and the US WTI on track for its highest close since August 12, 2024, and kept both crude oil benchmarks in technically overbought territory for a second day in a row.

Moreover, with Brent and WTI front-month prices rising around seven per cent over the past three trading sessions, the premium of front-month contracts over later-dated futures, known in the energy industry as time spreads, soared to its highest in several months. Back home, crude oil futures last traded 4.46 per cent higher at ₹6,869 per barrel on the multi-commodity exchange (MCX).

Also Read: Oil sizzles to 3-month high after US imposes tougher sanctions on Russian crude; Brent rallies 4% to touch $80

Brent hits 4-month high: What’s driving crude oil prices?

-The US Treasury imposed broader sanctions on Russian oil producers last week amid the Russia-Ukraine war, including Gazprom Neft and Surgutneftegaz and 183 vessels that have shipped Russian crude oil. The sanctions on trade target the revenue and profits Moscow has used to fund its military war with Ukraine. 

-Commodity analysts and energy traders said the sanctions on Russian crude oil would push top importers China and India to source more crude from the Middle East, Africa and the Americas, boosting trade prices and shipping costs.

-Analysts say there are genuine fears in the market about supply disruption. However, what will happen to crude oil prices and Russia sanctions when Donald Trump takes charge as the new US President next Monday is unclear.

Also Read: Fresh US sanctions on Russian oil unlikely to have immediate impact on India

-Goldman Sachs estimated that vessels targeted by the sanctions transported 1.7 million barrels per day (bpd) of oil in 2024, or 25 per cent of Russia’s exports. The bank is increasingly expecting its projection for a Brent range of $70-$85 to skew to the upside.

-Since the US announced the new sanctions package, at least 65 crude oil tankers have dropped anchor at multiple locations, including off the coasts of China and Russia. Many of the tankers named have been used to ship oil to India and China after the previous Western sanctions. 

-A price cap imposed by the Group of Seven (G7) 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 room to manoeuvre despite the new sanctions. 

Also Read: Brent crude outlook bearish on oversupply, grim oil demand; 2025 average pegged at $74 after hitting $80 in 2024

-According to news agency Reuters, the bank’s analysts added that to still use Western insurance stipulated by the price cap, it would ultimately need to acquire non-sanctioned tankers or offer crude at or below $60 a barrel.

-Six European Union (EU) countries called on the European Commission to lower the price cap put on Russian oil by G7 countries, arguing it would reduce Moscow’s revenue to continue the war while not causing a market shock.

–Extreme cold in the US boosted demand for heating fuels. This spiked energy futures to a two-year high for US natural gas and a six-month high for US diesel. US gasoline prices have not gained as much as others, cutting the gasoline crack spread, which measures refining profit margins, to its lowest since October 2023.

Also Read: Morgan Stanley, HSBC slash crude oil supply forecast; Brent average pegged near $70 for 2025 after OPEC+ verdict

Where are prices headed?

Commodity analysts noted crude oil prices witnessed very high volatility and gained for the third straight week. Prices surged to 15-week highs amid strict US sanctions on Russian oil and a decline in the US crude oil inventories. 

President Joe Biden’s administration imposed fresh sanctions on Russian oil producers, tankers, intermediaries, traders, and ports, aiming to affect every stage of Russian oil production and distribution chains. Fresh sanctions on Russia could create a supply deficit in global oil markets and support oil prices. However, strength in the dollar index could limit gains on oil prices.

“We expect crude oil prices to remain volatile. Crude oil has support at $76.59-76.80, and resistance is at $77.85-78.30 today’s session. In INR crude oil has support at Rs6,510-6,450 while resistance at Rs6,650-6,720,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.