By Shariq Khan
New York (Reuters) -Oil prices rallied nearly 3% to their highest in three months on Friday as traders braced for supply disruptions from the broadest U.S. sanctions package targeting Russian oil and gas revenue.
The Biden administration on Friday imposed fresh sanctions targeting Russian oil producers, tankers, intermediaries, traders and ports, aiming to hit every stage of Moscow’s oil production and distribution chains.
Brent crude futures were up $2.31, or 3%, to $79.23 a barrel by noon EST [1703 GMT], after crossing $80 a barrel for the first time since Oct.7.
U.S. West Texas Intermediate crude futures advanced $2.23, or 3%, to $76.15, also a three-month high.
Both contracts had gained more than 4% earlier in the session after an unverified document detailing the sanctions was circulated among traders in Europe and Asia.
Sources in Russian oil trade and Indian refining told Reuters that the sanctions will cause severe disruption of Russian oil exports to its major buyers India and China.
The sanctions will hit Russian oil export volumes and make them more expensive, UBS analyst Giovanni Staunovo said. Their timing, just a few days before Donald Trump’s inauguration as the U.S. president, makes it likely that they will be used as a negotiating tool by Trump to reach a peace deal in Ukraine, he said.
Oil prices are also being supported by extreme cold in the United States and Europe, which has lifted demand for heating oil, StoneX analyst Alex Hodes said.
“Cold weather has upped demand and now we are seeing NYMEX HO lead the way and pulling up crude along with it,” he said, referring to ultra-low sulfur diesel futures, also called heating oil, traded on the New York Mercantile Exchange.
The U.S. weather bureau expects central and eastern parts of the country to experience below-average temperatures. Many regions in Europe are likely to continue to experience a chillier-than-usual start to the year.
“We anticipate a significant year-over-year increase in global oil demand of 1.6 million barrels a day in the first quarter of 2025, primarily boosted by … demand for heating oil, kerosene and LPG,” JPMorgan analysts said in a note on Friday.
This post is originally published on INVESTING.
