Global crude prices jump nearly 5% after Trump’s new oil sanctions against Russia

Oil  prices rose  nearly  5%  on Thursday after the US imposed  sanctions  on major Russian suppliers Rosneft and Lukoil  over the Ukraine war, extending gains from the previous  session.

Brent crude futures were up $2.98, or 4.8%, at $65.57 a barrel at 1211 GMT, while U.S. West Texas Intermediate crude futures were up $3.01, or 5.2%, at $61.51.

The US  sanctions  mean refineries in China and India, major buyers of Russian  oil, will need to seek alternative suppliers to avoid exclusion from the Western banking system, according to Saxo Bank analyst Ole Hansen.

The U.S. said it was prepared to take further action as it called on Moscow to agree immediately to a ceasefire in Ukraine.

Britain sanctioned Rosneft and Lukoil  last week. EU countries have approved a 19th package of  sanctions  against  Russia that includes a ban on imports of Russian LNG.

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Prompt Brent crude futures switched to backwardation as the first-month Brent contract traded at  nearly  $2 a barrel above the contract for delivery in six months.

Right after the U.S.  sanctions  were unveiled, Brent and WTI futures rose by more than $2 a barrel, with support from a surprise decline in  US  stockpiles.

The impact of  sanctions  on  oil  markets will depend on how India reacts and if Russia finds alternative buyers, said UBS analyst Giovanni Staunovo.

India became the largest buyer of discounted seaborne Russian crude in the aftermath of Moscow’s war in Ukraine.

Indian refiners are likely to sharply curtail imports of Russian  oil  due to the new  sanctions, industry sources said on Thursday.

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Privately-owned Reliance Industries, the top Indian buyer of Russian crude, plans to reduce or halt such imports completely, according to two sources familiar with the matter.

But there remains some scepticism in the market about whether the U.S.  sanctions  would result in a fundamental shift in supply and demand.

“So far, almost all the  sanctions  against  Russia for the past 3-1/2 years have mostly failed to dent either the volumes produced by the country or the  oil  revenues,” said Rystad Energy analyst Claudio Galimberti.

Oversupply concerns following OPEC+ production increases capped crude’s gains on Thursday. UBS expects Brent to remain between $60-$70.

On the demand side, US crude  oil, gasoline and distillate inventories fell last week as refining activity and demand strengthened, the Energy Information Administration said on Wednesday.