Oil Enjoys Big Surge As Trump Imposes Massive Sanctions Against Russia

Meanwhile, Ukraine strikes yet another major Russian oil refinery: File Image/Pixabay

Oil prices catapulted forward to two-week highs on Thursday, propelled by the U.S. sanctions against Rosneft and Lukoil in a bid to cut them off from much of the international financial system and strangle Russia for its failure to seek peace with Ukraine.

Brent settled up $3.40, or 5.4 percent, at $65.99 per barrel, while West Texas Intermediate settled up $3.29, or 5.6 percent, at $61.79.

Bob McNally, president of Rapidan Energy, said weaker oil prices gave U.S. president Donald Trump scope to act against Russia while avoiding domestic damage: "It's about hurting the Russian finance ministry while protecting the U.S motorist."

McNally went on to speculate that if the sanctions are loosely enforced, WTI could dip back into the $50s but there's also a risk that prices could push higher if the administration takes a hard line.

As for other ramifications of the sanctions, Matt Smith, an oil analyst at Kpler, told clients in a note, "Refiners in India, China and Turkey are expected to conduct internal risk assessments on dealings with the sanctioned Russian firms while waiting for clarifications from their governments."

Smith added that oil could be resold at steep discounts to refiners willing to take risks, "However, a major disruption to Russian crude exports appears unlikely."

Meanwhile, the war between Russia and Ukraine raged on, with the latter confirming drone strikes on two strategic targets: the Ryazan Oil Refinery and an ammunition depot near Valuyki, Belgorod Oblast.

Owned by Rosneft, the refinery, which was said to have suffered a major fire, can process over 17 million tons of crude and is key to fuelling Russian military units and maintaining logistical operations.

In other oil news on Thursday, Washington announced it will reopen the full 1.5 million acre Coastal Plain of the Arctic National Wildlife Refuge to oil and gas drilling, along with reinstating previously cancelled leases held by the Alaska Industrial Development and Export Authority.

The Trump administration is also pursuing new lease opportunities across 82 percent of the National Petroleum Reserve-Alask, a 23 million acre expanse deemed off-limits by the previous administration.