(MENAFN- The Arabian Post)
Global oil prices have climbed to their highest levels in over three months following the U.S. Treasury's imposition of extensive sanctions on Russia's energy sector. These measures aim to curtail the revenue streams funding Moscow's military actions in Ukraine.
The sanctions, announced by the Biden administration, target major Russian oil producers, including gazprom Neft and Surgutneftegas, as well as 183 vessels involved in transporting Russian oil. This comprehensive action seeks to disrupt Russia's oil exports, particularly to significant consumers like China and India.
In response to the sanctions, Brent crude futures rose by 1.69%, reaching $81.11 per barrel, while U.S. West Texas Intermediate crude increased by 1.83% to $77.97 per barrel. These price movements reflect market concerns over potential disruptions in global oil supply chains.
Analysts predict that the sanctions will severely impact Russian oil exports, compelling China and India to seek alternative sources from the Middle East, Africa, and the Americas. This shift is expected to elevate global oil prices and increase shipping costs in the coming months. Harry Tchilinguirian, head of research at Onyx Capital Group, noted that the sanctions would be particularly consequential for India, given its substantial imports of Russian oil.
The U.S. administration anticipates that these measures will cost Russia billions of dollars monthly, thereby diminishing its capacity to finance the conflict in Ukraine. A senior administration official emphasized that the sanctions are designed to disrupt every stage of Russia's oil production and distribution chain, making it increasingly challenging for Moscow to sustain its energy exports.
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The sanctions also target the so-called“shadow fleet” of vessels that have been instrumental in transporting Russian oil while evading existing restrictions. By focusing on these ships, the U.S. aims to close loopholes that have previously allowed Russian oil to reach international markets despite sanctions.
In addition to targeting oil producers and transport vessels, the sanctions extend to oil traders and energy officials involved in facilitating Russia's energy exports. This comprehensive approach is intended to dismantle the complex network that has enabled Russia to continue profiting from its oil industry amid international sanctions.
The impact of these sanctions is expected to ripple through global energy markets. Traders and analysts foresee increased competition for alternative oil supplies, leading to higher prices and elevated freight costs. This development comes at a time when global oil markets are already contending with various challenges, including production cuts by OPEC+ and fluctuating demand patterns.
In response to the sanctions, Hungary has announced plans to engage in discussions with regional allies to address the escalating oil prices. Hungarian Foreign Minister Peter Szijjarto highlighted the severe challenges posed by the sanctions for Central Europe, as reduced crude oil supplies are expected to drive up the demand for refined fuels like petrol and diesel, causing significant price hikes.
Market participants are closely monitoring the situation, with some expressing concerns about potential supply shortages. The sanctions could lead to a reduction of approximately 0.8 million barrels per day in Russian crude oil exports, according to estimates by Citi analysts. This anticipated shortfall is likely to exert upward pressure on oil prices, affecting consumers and industries worldwide.
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