Oil prices edged lower on Friday but posted their biggest weekly gain since June after new US sanctions issued against Russia’s two largest oil companies over the Ukraine war raised supply concerns.
Brent, the benchmark for two-thirds of global crude oil, settled 0.08 per cent lower at $65.94 a barrel when markets closed on Friday. West Texas Intermediate, the US gauge for crude, was down 0.47 per cent to close at $61.5 a barrel.
Both benchmarks recorded a gain of more than 7 per cent for the week.
“Over the past few days, US sanctions on Rosneft and Lukoil have clearly pushed oil prices higher,” Dilin Wu, research strategist at trading platform Pepperstone, said.
However, the new sanctions are unlikely to create a major supply shock as Russia is expected to continue to sell oil in global markets.
“The sanctions mainly target trading and settlement rather than actual production, and Russia has long navigated such restrictions using third-party routes and shadow fleets,” Ms Wu said.
“Typically, prices jump briefly after new sanctions, but supply flows adjust.”
Between 500,000 to 600,000 barrels a day of Russian oil production is at risk of being curtailed following US move, according to Rystad Energy estimates.
The development comes as Washington increases pressure on Moscow to end the Ukraine war.
The US Treasury Department said all entities that are owned 50 per cent or more, directly or indirectly, by the two companies have been blocked, even if they are not officially designated by the department's Office of Foreign Assets Control.
“Now is the time to stop the killing and for an immediate ceasefire,” US Treasury Secretary Scott Bessent said.
“Treasury is prepared to take further action if necessary to support President Trump’s effort to end yet another war.”
Oil prices surged following the announcement with both Brent and WTI rising by about 5 per cent in anticipation of supply constraints. However, prices pared gains as markets did not panic over the new sanctions on Russian companies.
“In the short term, the uncertainty and heightened tension could support prices, with speculative capital amplifying moves and the winter heating season providing an extra lift,” Ms Wu said.
“Over the medium to long term, however, weak demand remains the main limit on oil. The sourcing decisions of India and China will be critical. If they turn to alternative supplies, oil is likely to trade in a higher but still rangebound zone.”
China and India have been the main buyers of Russian oil since Ukraine war began in 2022, as the EU and other US allies boycotted Moscow's energy exports.
Meanwhile, Kuwait's Oil Minister Tariq Al Roumi on Thursday said Opec, the alliance of leading oil producers, would be ready to supply more crude if shortages are created due to the new sanctions.
He said he expected oil prices to rise in response to the US and EU actions. Kuwait is Opec's fifth-largest oil producer.
