Oil prices rose roughly 2% on Monday to reach a four-month high, driven by expectations that expanded U.S. sanctions on Russian oil would prompt major buyers like India and China to seek alternative suppliers. Brent crude gained $1.25 (+1.6%) to close at $81.01, its highest since August 26. WTI rose $2.25 (+2.9%) to settle at $78.82, marking its highest close since August 12. Both benchmarks remain in technically overbought territory for the second consecutive day.
Key factors driving the market include concerns about supply disruptions stemming from the sanctions, which target Russian oil producers, tankers, and intermediaries. Goldman Sachs highlighted that vessels affected by these measures transported about 1.7 million barrels per day (bpd) of oil in 2024, equivalent to 25% of Russia’s exports. Traders noted increased time spreads, with front-month prices surging relative to later-dated futures, reflecting heightened supply risks.
The sanctions have led to logistical bottlenecks, with at least 65 tankers anchored near China and Russia. Many of these vessels previously transported oil to India and China under earlier sanctions, often carrying Iranian and Russian crude.
Additional factors influencing oil prices include strong demand for energy contracts, evidenced by record-high trading volumes for Brent and WTI. Meanwhile, a stronger U.S. dollar, bolstered by robust job growth data and a declining unemployment rate, poses a potential headwind by making oil more expensive for foreign buyers. Higher interest rates could further dampen demand by slowing economic activity and raising borrowing costs.