Global oil prices experienced a significant surge on Thursday, rising by over 5% after US President Donald Trump imposed new sanctions on Russia’s key oil industry. The move aims to pressure Moscow to end its ongoing conflict in Ukraine. The sanctions target Russia’s two largest oil companies, Rosneft and Lukoil, which collectively account for more than half of the country’s oil output.
The decision was made in conjunction with the European Union’s latest round of punitive measures against Russia. According to analysts at Global Risk Management, these new sanctions are likely to have a substantial impact on the global oil market. Arne Lohmann Rasmussen, an analyst at the firm, noted that the sanctions could significantly affect Russia’s oil production and exports.
The US sanctions come as President Trump prepares to meet with Chinese leader Xi Jinping next week to discuss trade. The meeting, scheduled to take place on October 30, has sparked optimism among investors, leading to a rebound in major US equity indices. The Dow, S&P 500, and Nasdaq Composite all saw gains, rising by 0.3%, 0.6%, and 0.9%, respectively.
Russia’s foreign ministry has warned that the sanctions could jeopardize diplomatic efforts to resolve the Ukraine conflict. The ministry claimed that Russia has developed a “strong immunity” to the sanctions. However, analysts believe that the measures could severely impact Russia’s ability to fund its military activities.
The surge in oil prices has also been driven by expectations of reduced Russian oil purchases by India. Bloomberg cited unnamed Indian refinery sources as saying that flows of Russian crude are expected to plummet to almost zero due to the US sanctions. This development could further squeeze Russia’s oil exports and exacerbate the global supply deficit.
As markets look ahead to Friday’s US consumer price data, investors are closely watching the potential implications for US monetary policy. The data release is particularly significant given the current government shutdown. With global markets remaining volatile, the outcome of the US-China trade talks and the effectiveness of the sanctions on Russia’s oil industry will be crucial in determining the direction of oil prices and the broader economic landscape.