Oil prices have jumped significantly following the United States’ announcement of sanctions targeting Russia’s largest oil companies. West Texas Intermediate (WTI) soared by as much as 6.2 per cent, exceeding $US61 a barrel. This surge marks the most substantial single-day increase since the beginning of the Israel-Iran conflict on June 13.
The US government has blacklisted Russian oil giants Rosneft PJSC and Lukoil PJSC in an effort to curtail the revenue streams that Russia uses to fund its war in Ukraine. These sanctions represent a notable shift in policy. Prior efforts, such as the Group-of-Seven price cap on Russian oil, aimed to limit the Kremlin’s income without disrupting global supply or triggering price spikes.
Senior refinery executives in India, a major purchaser of Russian crude oil, have indicated that these restrictions could effectively halt the flow of oil. The impact of these sanctions arrives during a period when global oil supply appears abundant, as nations within and outside the OPEC+ producer alliance have been increasing their output amid signals of slowing demand growth.
Should India significantly reduce its purchases of Russian oil, the focus will likely shift to China, another leading buyer of Russian crude, and whether they are willing to increase their intake to offset the potential supply disruption.