Oil prices surge nearly 3% after Trump slaps sanctions on top Russian oil firms

New York (TIP)- Oil prices rose sharply in early Asian trade on Thursday, Oct 23, after U.S. President Donald Trump announced sanctions on Russia’s largest oil companies, a move that stands to potentially crimp global supplies.
The development helped crude prices recover further from five-month lows hit earlier this week, with positive U.S. inventory data also providing support.
Brent oil futures for December jumped as much as 3% to $64.44 a barrel, while West Texas Intermediate crude futures rose 3% to $60.26 a barrel.
Both contracts were trading up about 2.8% by 23:38 ET (03:38 GMT).
Trump hits Russia’s Lukoil, Rosneft with sanctions
Trump’s Treasury Department on Wednesday unveiled sanctions against Lukoil and Rosneft, Russia’s two biggest oil companies, and called for an immediate ceasefire with Ukraine.
Treasury Secretary Scott Bessent said the companies funded “the Kremlin’s war machine,” and that the Treasury was prepared to take more action against Moscow.
The sanctions now stand to block a chunk of global oil supplies, and helped ease concerns over a looming supply glut.
Wednesday’s announcement also marks a pivot in Trump’s stance on Russia, who had so far not imposed any direct sanctions on the country in his second term.
Trump had earlier this year attempted to pressure major buyers of Russian oil– India and China– and had slapped steep trade tariffs on New Delhi over its purchases of Russian oil.
Recent reports said India was displaying some willingness to end its Russian oil buying, and could seek crude from other sources.
The latest round of U.S. sanctions could also push flows of cheap Russian oil to Indian refiners to near zero, Bloomberg reported on Thursday, citing industry executives.
Separately, the European Union also imposed fresh sanctions on Russia, targeting Moscow’s shadow fleet of tankers while also banning all Russian liquefied natural gas imports.
“We must wait and see if these latest sanctions are more effective or if Russia can circumvent them, as it did with curbs earlier this year,” ING analysts wrote in a note.
But they noted that regardless, the latest sanctions represented a pivot in U.S. policy on Russia, and increased the risk of more sanctions on Moscow and its oil customers, especially if little progress was made towards a Russia-Ukraine peace deal.
US inventory draw supports oil prices
Oil prices recovered from five-month lows hit earlier this week after data showed U.S. inventories unexpectedly shrank in the week to October 17.
Inventories shrank by 0.96 million barrels, against expectations for a 2.2 million barrel build. Draws in gasoline and distillate stockpiles also helped spur some optimism over demand in the world’s largest fuel consumer.
Markets are now seeking more cues on the U.S. economy from key consumer inflation data for September.
Concerns over the U.S. economy and fuel demand were a key weight on oil prices in recent weeks. Simmering U.S.-China trade tensions and a strong dollar had also weighed on oil.