Oil Prices Surge Following New EU Sanctions on Russia

Crude oil prices experienced a notable increase on Friday as investors reacted to the European Union’s newly announced sanctions against Russia. By 11:51 GMT, Brent crude futures rose by 73 cents, or 1.05 percent, reaching $70.25 a barrel. Similarly, U.S. West Texas Intermediate (WTI) crude futures gained 83 cents, or 1.23 percent, climbing to $68.37 a barrel.

Details of the Sanctions

The EU’s latest sanctions package, marking the 18th set of measures against Russia, specifically targets the country’s oil and energy sectors in response to its ongoing conflict in Ukraine. A key aspect of this package is the reduction of the G7 price cap for purchasing Russian crude oil to $47.6 a barrel. Additionally, the EU will prohibit all imports of petroleum products derived from Russian crude, with exceptions for imports from Norway, Britain, the U.S., Canada, and Switzerland, as confirmed by EU diplomats.

Kaja Kallas, the EU’s foreign policy chief, also announced on social media platform X that the largest Rosneft oil refinery in India has been designated as part of the sanctions. Analysts suggest that the rise in gasoil futures is likely influenced by the EU’s ban on fuel imports from Russian crude, alongside dwindling inventories in northwest Europe.

Market Reactions and Future Outlook

According to data from analytics firm Kpler, the EU and UK have imported approximately 196,000 barrels per day of refined fuel from India this year, primarily consisting of diesel, gasoil, and jet fuel. Europe has a limited capacity to produce the diesel and jet fuel it consumes, making it reliant on imports. Janiv Shah, vice president of oil markets at Rystad Energy, noted, “This shows the market fears the loss of diesel supply into Europe, as India had been a source of barrels.”

As investors assess the implications of the new sanctions, they are also closely watching for potential developments from the U.S. government regarding further sanctions. President Donald Trump has threatened additional measures targeting buyers of Russian exports unless a peace agreement is reached within 50 days. Commerzbank analysts highlighted that the U.S. has not aligned with the EU on its recent sanctions, which could limit the EU’s ability to enforce these measures effectively.

Aldo Spanjer, an analyst at BNP Paribas, commented on the situation, stating, “We expect limited impact from the lower price cap and tanker sanctions; landed prices for diesel in Europe could increase somewhat due to larger logistics issues to get products into Europe, but we think enforcement challenges limit the impact on flows.”

The market may also have received some support from reports indicating that a restart of oil exports from Iraq’s Kurdish region is not expected soon, despite the Iraqi federal government’s announcement that shipments would resume immediately. This uncertainty may contribute to ongoing fluctuations in oil prices as the market navigates the complex landscape of international relations and energy supply chains.