Crude Oil Price Surge: China’s & India’s Cuts—What’s Next?


Crude Oil Price Surge: China's & India's Cuts—What’s Next?

Crude oil price extended gains for a third session on Monday, with Brent crude rising above $80 a barrel to its highest in more than four months, driven by wider U.S. sanctions on Russian oil and the expected effects on exports to top buyers India and China.

Brent crude futures LCOc1 rose $1.68, or 2.1%, to $81.44 a barrel by 0858 GMT after hitting the highest level since Aug. 27 at $81.49.

U.S. West Texas Intermediate crude CLc1 rose $1.84, or 2.4% to $78.41 a barrel after touching its highest since Aug. 15 at $78.58.

Brent and WTI have climbed by almost 7% since Jan. 8, surging on Friday after the U.S. Treasury imposed wider sanctions on Russian oil. The new sanctions included producers Gazprom Neft SIBN.MM and Surgutneftegaz SNGS.MM, as well as 183 vessels that have shipped Russian oil, targeting revenue Moscow has used to fund its war with Ukraine.

Russian oil exports will be hurt severely by the new sanctions, pushing China and India to source more crude from the Middle East, Africa and the Americas, which will boost prices and shipping costs.

The sanctions include a wind-down period until March 12, so there may not be major disruptions yet, Varga added.

Goldman Sachs estimated that vessels targeted by the new sanctions transported 1.7 million barrels per day (bpd) of oil in 2024, or 25% of Russia’s exports. The bank is increasingly expecting its projection for a Brent range of $70-85 to skew to the upside, its analysts wrote in a note.

Expectations of tighter supplies have also pushed Brent and WTI monthly spreads to their widest backwardation since the third quarter of 2024. Backwardation is a market structure in which prompt prices are higher than those for future months, indicating tight supply.

Many of the tankers named in the latest sanctions have been used to ship oil to India and China after previous Western sanctions and a price cap imposed by the Group of Seven countries in 2022 shifted trade in Russian oil from Europe to Asia. Some of the ships have also moved oil from Iran, which is also under sanctions.

Crude oil price surged over 4% yesterday, rallying sharply to settle at 6862, compared to the previous day’s close of 6576.

The bullish outlook shared on January 3 proved accurate, with crude oil price reaching both predicted targets of 6380-6455.

A strong bullish candlestick formation, coupled with a favorable RSI, signals that the bullish momentum is likely to continue. Additionally, ongoing global supply concerns could further fuel gains.

However, a stronger US dollar may act as a hurdle. Still, any temporary dip toward 6750-6740 is expected to attract buying interest, with the next targets at 6920-7030.

On the downside, immediate support levels are seen at 6420-6315.

Until then, Happy Trading!

Commodity Samachar Securities
We Decode the Language of the Markets

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