President Donald Trump could further rachet up sanctions against Russia’s oil sector, with an expected global surplus of crude next year leaving the U.S. room to escalate while insulating American drivers from a price shock.
The Treasury Department on Wednesday announced sanctions against Rosneft and Lukoil, Russia’s two largest oil exporters, citing Moscow’s “lack of serious commitment to a peace process to end the war in Ukraine.”
The sanctions mark the “most material move to date by the United States to shutter the Russian war ATM,” Helima Croft, head of global commodity strategy at RBC Capital markets, told clients.
The sanctions took the oil market by surprise. U.S. crude prices spiked nearly 6% to trade above $60 per barrel in response after many traders had discounted the risk of escalation due to Trump’s focus on keeping energy prices low.
Benchmark West Texas Intermediate U.S. crude oil prices hit five-month lows Monday and are down nearly 14% this year. The market has been under pressure as OPEC+ increases production and renewed trade tensions between the U.S. and China trigger fears of a global economic slowdown.
