Crude prices jump as US imposes draconian sanctions on Russian oil industry

A view of the Esther offshore oil and gas platform in the Pacific Ocean January 5, 2025 in Seal Beach, California.

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Oil prices jumped on Friday as the US Treasury Department announced drastic sanctions against the Russian oil industry.

Brent crude gained $2.84, or 3.69 percent, to close at $79.76 a barrel, while U.S. crude oil rose $2.65, or 3.58 percent, to settle at $79.76 a barrel. 76.57 dollars per barrel. Benchmark indices closed at their highest levels since October.

The sanctions target Russian oil companies Gazprom Neft and Surgutneftegas and their subsidiaries, more than 180 oil companies and more than a dozen Russian energy officials and executives. Among the sanctioned executives is Gazprom Neft CEO Alexander Valeryevich Dyukov.

The sanctioned vessels are mostly oil tankers that are part of Russia's “ghost fleet” that has avoided existing sanctions on the country's energy exports, according to the Treasury Department.

“The United States is taking sweeping action against Russia’s main source of revenue, which funds its brutal and illegal war against Ukraine,” Treasury Secretary Janet Yellen said in a statement.

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Brent crude futures, 1 year

“With today's actions, we are increasing the sanctions risk associated with trade in Russian oil, including the facilitation of shipping and finance to support Russian oil exports,” Yellen said.

The perception in the oil market is that Indian and Chinese refiners who have imported Russian oil will have to fight to get barrels from the Middle East, Bob Yawger, executive director of energy futures at Mizuho Securities, in a note to its clients.

The Biden administration has sought to increase pressure on Russia and provide aid to Ukraine before President-elect Donald Trump takes office.

“The Biden administration has opted for tougher energy sanctions, which has made the oil market particularly complacent about sanctions risks,” said Bob McNally, president of Rapidan Energy Group.

“Therefore, we expect the current large risk premium on Brent to remain pending signals from the Trump team on whether these sanctions will continue,” McNally said.

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