Oil prices climbed sharply on Thursday, marking their biggest daily gains in four months, after Washington imposed sweeping sanctions on Russian oil majors Rosneft and Lukoil, tightening pressure on Moscow over its war in Ukraine and jolting the global energy market.
Brent crude rose $3.40, or 5.4%, to settle at $65.99 a barrel, while U.S. West Texas Intermediate (WTI) crude advanced $3.29, or 5.6%, to $61.79. The two benchmarks hit their highest levels since early October, underscoring how the U.S. measures against two of Russia’s largest energy companies are reshaping global supply expectations.
“The announcement of sanctions by the U.S. on Rosneft and Lukoil is a major escalation in the targeting of Russia’s energy sector and could be a big enough shock to flip the global oil market into a deficit next year,” said David Oxley, chief climate and commodities economist at Capital Economics.
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Russia was the world’s second-largest crude producer in 2024, behind only the United States. The sanctions mark the most aggressive step yet by Washington to restrict Moscow’s oil revenues, as previous measures had left Russian exports largely intact through alternative shipping and payment routes.
The immediate market reaction was swift. U.S. diesel futures surged nearly 7%, driving refining margins to their highest levels since February 2024. Analysts said the move reflects tightening supply fears as refiners in Asia begin reassessing their reliance on Russian barrels.
Ole Hansen, head of commodity strategy at Saxo Bank, explained that “refineries in China and India, major buyers of Russian oil, will need to seek alternative suppliers to avoid exclusion from the Western banking system.”
According to multiple trading sources cited by Reuters, Chinese state oil giants have already suspended seaborne purchases from Rosneft and Lukoil, signaling a potential redirection of Asian crude flows that could further tighten global markets.
Kuwait’s oil minister said the Organization of the Petroleum Exporting Countries (OPEC) would be ready to compensate for any supply shortfall by rolling back existing output cuts. Yet Moscow’s response suggested defiance rather than retreat.
“This is, of course, an attempt to put pressure on Russia,” President Vladimir Putin said. “But no self-respecting country and no self-respecting people ever decides anything under pressure.”
The U.S. government, meanwhile, warned that more sanctions could follow if Moscow refuses to agree to an immediate ceasefire in Ukraine.
Pavel Molchanov, an investment strategy analyst at Raymond James, said the latest sanctions may raise logistical costs for Russia but were unlikely to completely derail its exports.
“The various U.S. and EU sanctions thus far have had essentially no effect on Russia’s ability to export oil, so we doubt that this latest round will be game-changing,” he said. “That said, the Kremlin may need to use more intricate methods to ship its oil covertly, thereby increasing costs.”
Molchanov noted that Russian crude accounts for roughly 7% of global oil supply, making the sanctions a potentially destabilizing factor for a market already vulnerable to geopolitical risks.
The sanctions come amid a broader Western campaign to limit Russia’s energy income. Britain recently sanctioned Rosneft and Lukoil, while the European Union this week approved its 19th package of Russia-related penalties, including a ban on imports of Russian liquefied natural gas (LNG). The EU also added two Chinese refiners—together capable of processing 600,000 barrels per day—and Chinaoil Hong Kong, a PetroChina trading arm, to its sanctions list.
UBS analyst Giovanni Staunovo said the full impact on global oil markets will depend largely on how India responds.
“If Indian refiners comply fully, the short-term disruption could be significant. But if Russia quickly finds new buyers, the market impact may ease,” he said.
India has been one of the biggest beneficiaries of discounted Russian oil since 2022, when Western buyers shunned Moscow’s exports after the invasion of Ukraine. But industry insiders say the new round of U.S. sanctions is already prompting a shift.
Sources told Reuters that privately owned Reliance Industries, India’s top buyer of Russian crude, plans to scale down or completely halt such imports to remain in compliance with U.S. restrictions. The move, analysts say, could also help New Delhi advance negotiations on trade and energy deals with Washington.
For now, the sanctions have injected new uncertainty into an already volatile market. If both Chinese and Indian refiners significantly cut Russian imports, analysts warn that the resulting supply gap could push Brent prices back toward the $70 mark in the coming weeks—unless OPEC steps in with additional output.