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Crude prices on Monday reached their highest level since August as Indian and Chinese refiners scrambled to find alternative supplies after tough new US sanctions targeting Russian oil revenues.
Brent crude, the international benchmark, rose as much as 1.9 per cent to $81.29 a barrel in London, beyond the $80.93 high of October last year. The gains followed a 3 per cent rise on Friday following the initial announcement of the new sanctions. WTI, the US equivalent, added 2.3 per cent to $78.33.
Giovanni Staunovo, an oil analyst for UBS, said there had been reports that refineries in China, the world’s largest oil importer, and India, the third-largest, were seeking new sources of crude after the US announced sanctions on producers including Gazprom Neft and Surgutneftegas.
“There’s some concern that some of this Russian supply will get disrupted,” Staunovo said. “That’s supporting prices.”
The US intended to choke off some of that supply by imposing sanctions on a range of bodies, including 183 ships in the “dark fleet” of oil tankers operating outside international rules that transport the country’s oil production.
China and India have been particularly enthusiastic buyers of Russian crude oil after US and European efforts to restrict the country’s ability to sell oil profitably began after Russia’s full-scale invasion of Ukraine started in February 2022.
Amrita Sen, director of research at consultancy Energy Aspects, agreed, saying some Chinese refiners were in “panic mode” following the announcement.
There were also indications in the sanctions announcement that the US would consider imposing restrictions on anyone trading in Russian oil. It had previously applied sanctions only to anyone trading at prices above a $60-a-barrel cap introduced to limit Russia’s profits while preventing an oil price spike.
Jorge Montepeque, a managing director at Onyx Capital, said there had been more buying than usual from India following Friday’s announcement and that Indian purchasers were buying oil types that never normally interested them.
“One of the Indian refiners called someone I know to ask if they had had any cargoes of Oman crude,” Montepeque said. “My source was surprised because Oman crude generally goes to China and Indian buyers have not bid for it for a couple of years.”
Oil prices have been subdued for several months because of the plentiful supply in the market and weak demand growth.
Staunovo said that, beyond the immediate shock, the question would be whether the sanctions proved effective.
“It comes down to whether Russia finds a way to still sell its oil,” Staunovo said. “That’s the most difficult part. But in the short term, prices should still stay supported.”
European gas prices rose as much as 6 per cent on Monday, also boosted by the sanctions on Russia, which included two liquefied natural gas plants that supply Europe.
Benchmark gas prices in Europe had dropped more than 9 per cent last week.