Oil surges as Russia sanctions roil market, but western enforcement is key

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Crude oil futures rose by the most in more than four months Thursday after the Trump administration imposed significant sanctions on Russia's biggest oil companies, raising expectations that India and possibly China could stop or at least reduce their purchases of Russian oil.

Russia exports ~5 million bbl/day of oil, with the vast majority sent to India and China, but the key question is whether the sanctions will deter the countries from buying Russian oil.

"We are back to the same questions we have had all year on sanctions: Will they stick, or will the banking/oil trading world figure out a way around them?" Scott Shelton of TP ICAP said in a note.

Buyers of Russian oil must decide quickly how to respond [https://www.ft.com/content/55738281-fa09-4d41-965c-decb83d371fa], or risk losing access to dollar funding and the wider western financial system.

For refiners with global operations, losing access to U.S. capital markets could be catastrophic; Reliance Industries, one of India’s largest multinationals and owner of the world's biggest oil refinery, already has said it would "recalibrate" its approach to Russian oil.

The new U.S. sanctions "mark the most material move to date by the U.S. to shutter the Russian war ATM," RBC Capital head of global commodity strategy Helima Croft wrote. "If the Trump administration does indeed back [his] words by action, we anticipate that refiners seeking to retain access to U.S. capital markets will forgo Russian barrels."

The European Union also approved new sanctions phasing out purchases of Russian liquefied natural gas and targeting 37 foreign companies helping Russia circumvent sanctions on military goods or the Russian oil trade, including 15 Hong Kong and Chinese companies.

The new sanctions come at a time of heightened vulnerability for the Russian economy, which is heavily dependent on energy exports; the country's energy revenues, which come mainly from oil, already have tumbled 20% Y/Y in the first nine months of 2025, according to finance ministry data.

Many observers believe the new measures are unlikely to significantly shift Vladimir Putin’s war aims in Ukraine, as least in he near term; successive rounds of U.S. sanctions since 2022 have strained Russia's economy but have failed to stop the war.

Front-month Nymex crude (CL1:COM [https://seekingalpha.com/symbol/CL1:COM]) for December delivery finished +5.6% to $61.79/bbl and front-month Brent December crude (CO1:COM [https://seekingalpha.com/symbol/CO1:COM]) ended +5.4% to $65.99/bbl, the highest close for both benchmarks since October 8 and their largest gain since June 13; also, front-month Nymex RBOB gasoline (XB1:COM [https://seekingalpha.com/symbol/XB1:COM]) for November delivery closed +3.3% to $1.9269/gal, and front-month Nymex November ULSD (HO1:COM [https://seekingalpha.com/symbol/HO1:COM]) settled +6.8% to $2.403/gal.

Meanwhile, U.S. natural gas (NG1:COM [https://seekingalpha.com/symbol/NG1:COM]) fell after last week’s storage build came in above expectations, with natgas in underground storage rising by 87 Bcf to 3,808 Bcf, extending the surplus over the five-year average to 164 Bcf from 154 Bcf the week before; the front-month Nymex November contract closed -3.1% to $3.344/MMBtu.

ETFs: (NYSEARCA:USO [https://seekingalpha.com/symbol/USO]), (BNO [https://seekingalpha.com/symbol/BNO]), (NYSEARCA:UCO [https://seekingalpha.com/symbol/UCO]), (SCO [https://seekingalpha.com/symbol/SCO]), (USL [https://seekingalpha.com/symbol/USL]), (DBO [https://seekingalpha.com/symbol/DBO]), (DRIP [https://seekingalpha.com/symbol/DRIP]), (GUSH [https://seekingalpha.com/symbol/GUSH]), (USOI [https://seekingalpha.com/symbol/USOI]), (UNG [https://seekingalpha.com/symbol/UNG]), (BOIL [https://seekingalpha.com/symbol/BOIL]), (KOLD [https://seekingalpha.com/symbol/KOLD]), (UNL [https://seekingalpha.com/symbol/UNL]), (FCG [https://seekingalpha.com/symbol/FCG]), (NYSEARCA:XLE [https://seekingalpha.com/symbol/XLE])

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