(Jan 13): Oil extended gains to hit a more than four-month high, as a fresh wave of US sanctions against Russia’s energy industry threatened to crimp crude supplies in an already-tightening global market.

Global benchmark Brent advanced above US$81 (RM365.43) a barrel, after surging almost 4% jump in the prior session. West Texas Intermediate (WTI) was near US$78. On Friday, the US imposed its most aggressive and ambitious sanctions yet on Russia’s oil industry, targeting two large producers and exporters, insurance companies, and more than 150 tankers.

The sweeping moves — which came less than two weeks before US President-elect Donald Trump takes office — will throw the spotlight on key markets in India and China, with local refiners potentially being forced to seek alternative supplies. India emerged as a vital taker of Russian crude into the aftermath of Moscow’s 2022 invasion of Ukraine. Beijing is the world’s largest oil importer.

Crude has rallied strongly in recent weeks, with gains spurred by colder weather, falling US stockpiles, and speculation that Trump officials may seek to tighten sanctions against flows from Iran in the coming months. The broad sanctions package from the outgoing Biden administration threatens to roil the market further, while also complicating policy for suppliers’ cartel Opec+, and providing a fresh challenge for central bankers if it leads to stickier inflation.

Citigroup Inc said that as much as 30% of Russia’s so-called shadow fleet of tankers could be affected, threatening as much as 800,000 barrels a day, although the effective loss may be less that half that figure. Goldman Sachs Group Inc, meanwhile, said it hadn’t changed its expectations for Russian supply, as crude could be priced even more cheaply to incentivise buying.

With price swings picking up, parts of the so-called paper market have been flashing warning signs. Oil options have regained a bullish hue, with a gauge of implied volatility rising as skews increased their bias towards call options as of Friday’s close. Timespreads have also surged.

There have been signs that Russian supplies were already under pressure in recent weeks, with the nation’s seaborne crude exports estimated to have slumped to the lowest since August 2023. In Asia, meanwhile, some refiners in India and China have been increasing purchases from the Middle East and the Atlantic Basin, amid concern that further restrictions on imports from Russia and Iran may crimp access to supplies.

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Uploaded by Jason Ng