Oil prices are on the rebound as falling oil rig counts and violence in Libya helped further stall a selloff that began in June 2014
Oil soared after the US announced sanctions on Russia’s biggest oil companies, threatening supplies from one of the world’s top producing countries.
Brent futures rose $2.91, or 4.7%, to $65.50 a barrel at 10:51 a.m. EDT (1451 GMT).
The US crude oil grade, West Texas Intermediate jumped as much as 6.2% to trade above $61 a barrel, heading for the biggest one-day gain since the start of the Israel-Iran conflict on June 13.
The US blacklisted Russian oil giants Rosneft PJSC and Lukoil PJSC in an effort to cut off revenue Russia needs for its war in Ukraine. Senior refinery executives in India — a key buyer of Russian crude — said the restrictions would make it impossible for flows to continue.
The latest US sanctions are a radical change of policy, where previous efforts to pressure Russia to end the war included a Group-of-Seven price cap on Russian oil that sought to limit revenue for the Kremlin without disrupting supply and causing a spike in global prices.
The step comes at a time when global supply looks plentiful. Nations inside and outside the OPEC+ producer alliance have been ramping up output amid signs of cooling demand growth. If India does drastically cut purchases the question will become whether China, the other top buyer of Russian crude, is willing to step into the void.
“The latest US sanctions on Russia’s largest oil producers represent a significant and unprecedented escalation in Washington’s pressure campaign against Moscow,” said Rystad Energy’s head of geopolitical analysis, Jorge Leon. “Combined with the recent wave of attacks on Russian oil infrastructure, these sanctions raise the prospect of major disruptions to Russian crude production and exports, heightening the risk of forced production shut-ins.”
