Islamabad, Jan 11: Oil prices surged by over 4% on Friday, hitting their highest levels since October, as traders anticipated potential disruptions in supply, particularly due to more sanctions on Russia.
Brent crude futures rose by $3.50, or 4.6%, reaching $80.42 per barrel, marking the first time prices have crossed the $80 threshold since October 7.
Similarly, U.S. West Texas Intermediate (WTI) crude futures climbed by $3.57, or 4.8%, settling at $77.49 per barrel.
The United States is preparing to impose stringent sanctions on Russia’s oil industry, targeting 180 vessels, multiple traders, two major oil companies, and key Russian executives.
A document circulating in Europe and Asia, reportedly from the U.S. Treasury, reveals these sanctions but has not been independently verified by Reuters.
Expectations are mounting that the Biden administration will ramp up sanctions not only against Russia but also against Iran, further tightening the global oil supply at a time when reserves are low.
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Analysts predict that these additional sanctions could be a significant move in Biden’s final term, particularly as the administration seeks to manage energy security and inflation.
The anticipation of colder weather across the U.S. and Europe is also contributing to the price rally.
Temperatures in central and eastern parts of the U.S. are expected to drop below average, increasing the demand for heating oil, kerosene, and LPG.
This rise in demand will put more pressure on already tight oil inventories.
In fact, JPMorgan analysts project a notable year-over-year growth in global oil demand, forecasting an increase of 1.6 million barrels per day in the first quarter of 2025..
The spread between Brent’s front-month contract and the six-month contract has also widened, pointing to potential supply constraints amid rising demand.
Moreover, inflation concerns are playing a key role in the oil price surge. Rising inflation, particularly fueled by fears of higher tariffs under a potential Trump administration, is pushing investors toward oil futures as a hedge against the rising cost of living. Despite the U.S. dollar strengthening for six consecutive weeks, which traditionally makes crude oil more expensive outside the U.S., oil prices have continued to climb, reflecting strong global demand and market uncertainty.
