Oil Prices Jump 4% after U.S. Targets Russian Crude Sales

Oil prices on Friday climbed more than 4% after the U.S. tightened sanctions against Russian crude exports. The U.S. on Thursday imposed sanctions on two shipping companies carrying Russian crude that it said violated the G7′s oil price cap of $60 a barrel.

The price cap is a mechanism designed to retain a reliable supply of Russian flows in the market while curbing the Kremlin’s war chest. This move exacerbates supply concerns in an already tightly balanced energy market.

International benchmark Brent crude futures with December expiry traded 4% higher at $89.4 per barrel, while November U.S. West Texas Intermediate crude futures rose 4.1% to trade at $86.3 per barrel.

The G7, Australia and the EU implemented a $60-per-barrel price cap on Russian oil on Dec. 5 last year. It came alongside a move by the EU and UK to impose a ban on the seaborne imports of Russian crude oil.

Together, the measures were thought at that time to reflect by far the most significant step to curtail the fossil fuel export revenue that is funding Russia’s war in Ukraine.

Market participants are also closely monitoring the fallout from the escalating Israel-Hamas conflict, which has ratcheted up concerns that the fighting may affect regional energy production. The Middle East accounts for more than one third of global seaborne trade.

The International Energy Agency on Thursday described market conditions as fraught with uncertainty but said the conflict had not yet had a direct impact on physical supply.