- Oil prices rose sharply, with WTI estimated above $60 per barrel and Brent Crude at $65 amid the US sanctions on Russia.
- India and China could be sanctioned if they participate in oil imports, raising fears of trade flows.
- The markets focus on OPEC+ decisions and any further geopolitical risk for insights into crude oil direction.
The crude oil prices bolstered this week amid the lingering geopolitical fears that could tighten supply. The price of West Texas Intermediate crossed $60 per barrel, while the Brent crude rose to $65, extending gains after the last rally.
Following Moscow’s hostility in Ukraine, the US decision to sanction Russia’s major oil exporters, Rosneft and Lukoil, caused this spike. President Trump froze the assets of the two giants and barred American entities from engaging in business with them.
Additionally, the US Treasury hinted at potential secondary sanctions on foreign institutions and pressured them to stop importing oil from Russian entities. Consequently, volatility took over the market, and traders reassessed the crude supply amid the ongoing Russian export uncertainty.
Top Indian Crude oil importers like Reliance Industries are strategizing to reduce or suspend the imports altogether sharply. Last year, India, a key buyer, imported around 1.7 million barrels daily from Russia. China, another key buyer, could tread cautiously, especially the state-owned entities, to avoid getting penalized by the US.
Analysts suggest that the chances of an immediate supply cutoff are slim, but the logistical challenges are likely until buyers figure out an alternate supply chain. Phillip Nova’s Priyanka Sachdeva affirmed that if India steps back from crude imports, it could turn towards the US crude, further tightening the supply across Atlantic markets.
Additionally, the US domestic data revealed a decline in inventories. API reported a decrease of 3 mm/b till Oct 17, supporting the continued bullish momentum. Meanwhile, the US production reached 13.6 mmb/d, highlighting dominance in global supply chains.
However, some analysts believe the uptrend to be short-lived. Rystad Energy’s Claudio Galimberti asserted that earlier US sanctions couldn’t disrupt Moscow’s exports due to high Asian demand. If these sanctions are severe, then Russia has a lot at stake.
Moving forward, markets will focus on the OPEC+ decision, Chinese crude stockpiling, and he tensions between Ukraine and the Middle East. For now, the direction of oil prices remains uncertain. The US uses this fresh energy diplomacy to reach geopolitical ends.
The oil market is set to enter November with strong upward momentum and volatility amid geopolitical risks, declining inventories, and supply risks. Any pullback or further tension between the two countries could increase prices to $70, which was last seen mid-year.