Oil prices jumped by nearly 4% early on Friday after the United States took a tougher stance on the Western sanctions against Russia, adding to growing concerns about supply amid fears of escalation in the Hamas-Israel war.
As of 7:00 a.m. EST, the U.S. benchmark WTI Crude was up by 3.63% on the day at $85.95, and the international benchmark, Brent Crude, traded 3.50% higher at $88.99.
Both benchmarks were headed for a weekly gain after the Hamas attack on Israel pushed prices higher on Monday. But fears of economic slowdown and a build in U.S. commercial crude inventories capped the weekly gain.
On Friday, prices rallied after the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed late on Thursday sanctions on two entities and identified as blocked property two vessels that used Price Cap Coalition service providers while carrying Russian crude oil above the Coalition-agreed price cap.
The price cap of $60 per barrel of Russian crude oil set by the G7 and the EU says that Russian crude shipments to third countries can use Western insurance and financing if cargoes are sold at or below the $60-a-barrel ceiling. The measure took effect at the end of 2022 when the EU imposed an embargo on imports of Russian crude oil.
Thursday’s sanction move is the first time the U.S. has imposed sanctions for a breach of the price cap.
“Today’s action demonstrates our continued commitment to reduce Russia’s resources for its war against Ukraine and to enforce the price cap,” Deputy Secretary of the Treasury Wally Adeyemo said in a statement.
“We remain committed to implementing a price cap policy that has two goals: reducing the oil profits upon which Russia relies to wage its unjust war against Ukraine and keeping global energy markets stable and well-supplied despite turbulence caused by Russia’s unprovoked invasion of Ukraine.”
While the market continues to be concerned about demand amid high interest rates and slowing developing economies, supply-side issues dominated trades early on Friday with the tougher U.S. stance on Russia and the fear of supply disruptions in the Middle East in case the conflict spreads.