Oil prices soar after US imposes sanctions on Russian oil companies

Oil (BZ=F, CL=F)

Oil prices soared on Thursday morning, after the US imposed sanctions on Russia's two biggest oil companies, accusing Moscow of a lack of commitment to the peace process to end its war in Ukraine.

Brent crude (BZ=F) futures surged 3.4% to $64.72 per barrel at the time of writing, while West Texas Intermediate futures (CL=F) jumped 3.6% to $60.61 a barrel.

The US treasury announced sanctions against Rosneft and Lukoil overnight, which it said was "a result of Russia’s lack of serious commitment to a peace process to end the war in Ukraine".

The treasury said that the sanctions were aimed at increasing pressure on Russia's energy sector and impeding its ability raise revenue to fund the war and support its economy.

Read more: European stocks mixed and oil prices jump as Donald Trump sanctions Russia's biggest producers

Trump told reporters in the Oval Office on Wednesday that he had cancelled planned talks with Russia's president Vladimir Putin.

He said: "It just didn’t feel right to me. It didn’t feel like we were going to get to the place we have to get. But we’ll do it in the future."

Concerns about a risk of disruption to oil (BZ=F, CL=F) supply as a result of the sanctions pushed oil prices higher.

Warren Patterson, head of commodities strategy at ING, said: "The key question is whether these sanctions are enough to deter buyers of Russian oil, specifically China and India."

"We must wait and see if these latest sanctions are more effective or if Russia can circumvent them, as it did with curbs earlier this year," he said. "Regardless, a tougher stance on Russia by the US administration marks a shift in policy."

NY Mercantile - Delayed Quote•USD

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60.94

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As of 4:32:51 AM EDT. Market Open. Advanced Chart

Gold (GC=F)

Gold prices also rallied on Thursday morning, recovering some ground after a sharp fall earlier in the week, as political and economic uncertainty boosted demand for the safe-haven asset.

Gold futures (GC=F) jumped 1.2% to $4,113.10 per ounce at the time of writing, while spot gold was steady at $4,099.05 an ounce.

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Steve Clayton, head of equity funds at Hargreaves Lansdown, said that gold is still up more than 55% since the start of the year but has retreated from an all-time high of $4,381.50 per ounce, reached on Tuesday.

"The price has been supported by worries over the quality of government bonds in an era of huge deficits, the fractious state of international relations and signs that inflation is proving stubborn," he said.

COMEX - Delayed Quote•USD

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4,129.20

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Pound (GBPUSD=X, GBPEUR=X)

The pound was flat against the dollar (GBPUSD=X) on Thursday morning, trading at $1.3348 at the time of writing, as investors weighed the latest geopolitical and economic developments.

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The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six currencies, edged 0.1% higher to 99.02.

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Francesco Pesole, FX strategist at ING, said: "Based on yesterday’s price action, we reiterate our view that the dollar’s rebound is getting tired and probably requires some hawkish repricing to keep going."

In terms of the impact of US sanctions on Russia, Pesole said that while oil (BZ=F, CL=F) prices rallied on the news, the "the move has merely unwound October’s losses so far, and we’d likely need to see brent (BZ=F) heading to $70 to result in tangible support for USD".

Read more: Lloyds profits fall 36% in third quarter after bank flags higher car finance costs

In other currency moves, the pound was little changed against the euro (GBPEUR=X) on Thursday morning, trading at €1.1507.

More broadly, the FTSE 100 (^FTSE) rose 0.1% in early European trading to 9,525 points. For more details on market movements check our live coverage here.

CCY - Delayed Quote•USD

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1.1505

+0.0008

+(0.07%)

As of 9:40:55 AM GMT+1. Market Open. Advanced Chart

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