Oil rises nearly 5% on fresh US sanctions against Russia

Core Viewpoint - Oil prices increased nearly 5% following U.S. sanctions on major Russian oil suppliers Rosneft and Lukoil due to the Ukraine conflict, with Brent crude futures rising to $65.57 per barrel and U.S. West Texas Intermediate crude futures reaching $61.51 per barrel [1][2]. Group 1: Impact of Sanctions - The U.S. sanctions will compel Chinese and Indian refineries, significant purchasers of Russian oil, to find alternative suppliers to avoid exclusion from the Western banking system [2]. - The sanctions have led to a backwardation in prompt Brent crude futures, with the first-month contract trading nearly $2 above the six-month delivery contract [3]. - Analysts suggest that the overall impact of the sanctions on oil markets will depend on India's response and whether Russia can secure alternative buyers [3]. Group 2: Changes in Import Behavior - India has emerged as the largest buyer of discounted Russian crude since the onset of the Ukraine war, but Indian refiners are expected to significantly reduce or halt imports of Russian oil due to the new sanctions [4]. - Reliance Industries, the leading Indian buyer of Russian crude, is reportedly planning to cut or completely stop such imports [4]. Group 3: Market Sentiment and Supply Concerns - There is skepticism in the market regarding the effectiveness of U.S. sanctions in fundamentally altering supply and demand dynamics, as previous sanctions have not significantly impacted Russian oil production or revenues [5]. - Concerns about oversupply, particularly following OPEC+ production increases, have limited crude price gains, with UBS projecting Brent prices to remain between $60 and $70 [5]. Group 4: Demand Dynamics - U.S. crude oil, gasoline, and distillate inventories saw a decline last week, indicating strengthened refining activity and demand [6].