London, United Kingdom — Oil prices jumped around five percent Thursday after US President Donald Trump targeted Russia’s key oil industry with new sanctions in a bid to end the war in Ukraine.
The international benchmark contract, Brent North Sea crude, jumped 4.8 percent while West Texas Intermediate was up 5.1 percent.
Trump on Wednesday announced new sanctions against Russia’s two largest oil companies, Rosneft and Lukoil, saying his peace talks with President Vladimir Putin were not going “anywhere”.
The move was joined by another round of punishments by the European Union as part of attempts to pressure Moscow to end its three-and-a-half-year invasion of Ukraine.
“These new sanctions are likely to have a real impact,” said Arne Lohmann Rasmussen, an analyst at Global Risk Management.
According to industry analysts the two companies account for just over half of Russia’s oil output, and both also produce natural gas.
Analysts at Capital Economics said the move “could be a big enough shock to flip the global oil market into a deficit next year”, although they said the impact depends on the effectiveness of enforcement measures.
Russia’s foreign ministry warned that the sanctions risked jeopardizing diplomatic efforts to end the Ukraine war, and that it had developed a “strong immunity” to them.
Trump had resisted imposing new restrictions against Moscow for months, but his patience snapped after plans for a new summit with Putin in Budapest collapsed.
He had already claimed that India had agreed to cut its Russian oil purchases as part of a US trade deal, something New Delhi has not confirmed.
Bloomberg on Thursday cited unnamed Indian refinery sources as saying flows of Russian crude were expected to plunge almost to zero as a result of the US sanctions.
“As Rosneft and Lukoil produce around four million barrels per day between them, if India were to reduce its purchases, that would severely hamper Russia’s ability to fund its war,” said Trade Nation analyst David Morrison.
Trump in August raised tariffs on Indian exports to the United States to 50 percent, with Trump’s aides accusing India of fueling Russia’s war in Ukraine.
Major stock markets mostly rose as traders assessed US-China trade prospects and another batch of mixed company earnings.
Beijing said it would hold tariff talks with Washington from Friday, tempering trade fears over reports of potential US curbs on software exports to China.
Wall Street moved higher in morning trading. In Europe, London’s FTSE 100 hit a fresh record high.
Shares in Tesla skidded more than five percent lower at the start of trading but pared losses as the morning wore on.
Elon Musk’s electric car company reported a hefty drop in profits after trading ended on Wednesday, citing a drag from US tariffs and other expenses that offset increased sales.
Gold, seen as a safe haven, recovered from recent heavy selling to rise more than one percent to around $4,100 an ounce, though still well below the record high above $4,381 touched earlier this week.
