Global oil prices rose to a three-month high in the early hours of Monday following the announcement of new sanctions on Russian oil exports.
The new sanctions, which target Gazprom Neft and Surgutneftegas as well as 183 vessels involved in transporting Russian crude, are expected to destabilize global oil supplies and bolster prices in general.
Brent crude oil climbed to $81.11 a barrel while U.S. West Texas Intermediate (WTI) crude rose to $77.97 a barrel in the early trading hours of Monday.
Market experts are attributing the increase in price to concerns over reduced Russian oil supplies in the global market and increased competition for alternative supplies that will follow the sanctions.
While a senior U.S. Treasury official has said the decision was to reduce Russia’s ability to fund its ongoing war in Ukraine, nations that relied on Russian oils have started complaining of an increase in the price of crude oil.
Analysts describe the move as one of the most comprehensive efforts to date to disrupt Russian energy revenue streams.
According to Hungarian Foreign Minister Peter Szijjarto, the sanctions would affect central European nations and explained that reduced crude oil supplies would drive up prices of refined fuels.
He said “The sanctions pose severe challenges for Central Europe, particularly in terms of energy security. Reduced crude oil supplies will drive up demand for refined fuels like petrol and diesel, causing significant price hikes.”
China and India, two of the largest buyers of Russian crude, are expected to face immediate challenges as the sanctions disrupt their procurement strategies.
Both nations have relied on discounted Russian oil to meet their energy needs since the Ukraine conflict began. With the latest restrictions, refiners in these countries will likely pivot to Middle Eastern and African crude, intensifying competition and driving up prices.
The sanctions are expected to accelerate a reshuffling of global oil trade routes.
Import-dependent nations will need to secure alternative supplies and increase demand for crude from regions like the Middle East, Africa and the Americas.
Shipping costs may also rise as vessels navigate longer routes and higher-risk territories.
Sarah Johnson, an energy market analyst, said “The sanctions against Russia will not only impact the availability of oil but also put upward pressure on prices. Import-dependent countries will need to diversify their sourcing strategies, which may lead to increased competition among buyers.”
While the sanctions are designed to tighten the financial noose on Russia, they also risk amplifying global energy price volatility. Many economies, already grappling with inflation, may face further challenges as energy costs rise.
