Oil Prices Climb Amidst Impending Sanctions and Dimmed Peace Hopes
Oil prices edged higher on Thursday, rebounding from a previous decline triggered by a newly surfaced US peace proposal for Ukraine. The gains come ahead of the implementation of American sanctions targeting Russia’s oil sector.
Starting Friday, Lukoil and Rosneft, Russia’s two leading oil companies, will face US sanctions, restricting transactions with them.Analysts believe this action will tighten global oil supplies.
“Western retaliation and sanctions not only increase the geopolitical risk premium, but also create a potential physical shortage of oil,” noted Tamas Varga, an analyst at PVM Oil Associates. Though, the ultimate impact will hinge on the strength of secondary sanctions levied against entities continuing to trade with the sanctioned Russian firms.
As of 10:20 GMT (11:20 CET), Brent crude from the North Sea, with delivery in January, was trading at $64.22 a barrel, a 1.12% increase. West Texas Intermediate (WTI), the american benchmark for December delivery – its final day as a reference contract – rose 1.01% to $60.04 per barrel.
Wednesday saw a dip in crude prices following reports of a new US peace plan presented to Ukraine. The proposal reportedly demands significant territorial concessions from Ukraine to russia, alongside a halving of its armed forces.
A senior Ukrainian official, speaking anonymously to AFP, characterized the plan as echoing maximalist demands previously issued by Russia, effectively amounting to surrender. “Most observers consider this proposal to be entirely unrealistic,” stated Arne Lohmann Rasmussen, an analyst at Global Risk Management, contributing to the subsequent price recovery.
Further bolstering the oil market was data released by the US Energy Data Governance (EIA). the EIA reported a larger-than-expected decline in US crude inventories, falling by 3.4 million barrels last week, compared to market expectations of a 1.7 million barrel decrease. This decline was partially driven by a surge in exports during the period, contrasting with initial figures released by the American Petroleum Institute (API).
