Key Points
- Oil prices edged higher as new U.S. sanctions on Russian oil companies are about to take effect.
- The sanctions have already disrupted crude oil flows, especially to India, and forced Lukoil to sell assets.
- Despite geopolitical tensions, oil is still set for a yearly loss amid fears of a market surplus.
- Russian fuel exports fell to their lowest level since the Ukraine invasion began. The EU is also considering more measures to target Russia’s oil trade.
Oil prices rose slightly as investors weighed the impact of U.S. sanctions on Russia’s major oil companies, Rosneft and Lukoil, which are set to begin on Friday. At the same time, the European Union is considering additional measures to put pressure on Moscow.
Brent crude traded near $64 a barrel after a significant drop of over 2% on Wednesday. West Texas Intermediate was approaching $60 a barrel. The U.S. sanctions on the Russian oil giants have already disrupted crude oil flows, particularly to India, and have forced Lukoil to try to sell its international assets.
Despite these geopolitical tensions, oil is still on track for a yearly loss. This is due to expectations of an oversupply in the market as OPEC+ and other producers increase their output.
In the first half of November, Russian fuel exports dropped to their lowest level since the invasion of Ukraine. This was caused by attacks on Russia’s refining infrastructure and the impact of U.S. sanctions.
Following the penalties, companies are now looking to buy parts of Lukoil’s international business. For example, officials from ExxonMobil met with Iraq’s Oil Minister on Wednesday to discuss Lukoil’s stake in the West Qurna 2 field, a major source of Iraqi oil production.
Meanwhile, the EU is considering further restrictions on entities that help Russia’s “shadow fleet” of tankers transport oil. This is another effort to disrupt Moscow’s ability to finance its war against Ukraine.
