Crude oil prices exploded higher overnight, and the rally continued this morning. At the time of writing, both WTI and Brent were up around 5% for the day. The catalyst for the move was the announcement from the Trump administration that it was imposing new sanctions on Russia’s two largest oil companies, Rosneft and Lukoil. The administration cited Russia’s ‘lack of commitment’ to ending its war with Ukraine.
At the same time, the US Energy Information Administration reported an unexpected drawdown in US stockpiles. Adding to the rally in oil prices was news that India may wind down its purchases of Russian oil production. India buys around 1.6 million barrels per day (bpd), while China purchases around 2 million bpd.
As Rosneft and Lukoil produce around 4 million bpd between them, if India were to reduce its purchases, that would severely hamper Russia’s ability to fund its war. The Trump administration has slapped a 50% tariff on US imports of Indian goods. This could drop to around 15% should India comply with President Trump’s request. Today’s rally was exacerbated by some frantic short-covering, and technically, front-month WTI is now butting up against resistance (previously support) around $61.70.
Source: TN Trader
