Oil Prices Surge Amid Rising Sanctions on Russia and Supply Concerns

Key Takeaways

• Crude Oil Prices: WTI surged to $78.03, up 1.91%; Brent crude crossed $81 per barrel. MCX crude oil opened at 6758, up by 2.77%.
• Supply Concerns: US sanctions may reduce Russian exports, driving demand for OPEC+ and US oil. Higher freight costs and oil prices are expected.
• Nigeria’s Milestone: Nigeria achieved its OPEC quota of 1.5 million bpd in December 2024, a four-year effort.
• Expert Projections: Brent may rise above $85; potential to reach $90 if Iranian and Russian output decline.
• Economic Implications: Sanctions aim to weaken Russia amid the Ukraine conflict, reshaping global oil trade.

Petroleum Price: Crude Oil at 3-Month High

• After a subdued price trajectory last year, many had expected the plunge to continue. However, crude oil prices are gaining momentum once again, largely driven by growing expectations around the US imposing heavy sanctions on Russia.
• This has eventually pushed the price levels of the commodity to a three-month high. 
• On Monday, the WTI (West Texas Intermediate) crude oil index surged to $78.03, up by nearly 1.91%. Whereas, Brent crude futures surpassed the $81 per barrel level mark. MCX Crude oil prices opened at 6758 with a gain of 2.77%. 

Petroleum Demand & Supply: Impact of Sanctions

• These sanctions will be a major concern for not just Russia, but China and India as well which are among the top oil-importing nations. Just last year, India had surpassed China to become Russia's top oil buyer in August. This had a lot to do with China's economic trajectory which was slowing down alongside a weaker demand play. 
• The new sanctions will make it harder for Russia to export oil, which will eventually push nations like India and China to source more oil from OPEC+ and the US. This is expected to further push the price of oil upwards in the coming months. 
• This might also come as a major relief factor for oil-producing nations, as the price of the commodity had dropped below $65 per barrel last year. U.S. President Joe Biden introduced the broadest sanctions package targeting Russia's oil and gas revenues last Friday. 
• These sanctions are intended to weaken Russia's economy amid the ongoing conflict in Ukraine. Traders and analysts predict that these measures may compel Chinese and Indian refiners to source more oil from regions like the Middle East, Africa, and the Americas, leading to higher oil prices and increased freight costs. 

Petroleum News: Nigeria Acieves Its OPEC Quota

• The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has confirmed that Nigeria’s crude oil production reached 1.5 million barrels per day in December 2024, a major milestone in the country’s quest to raise output significantly. 
• This new information from the upstream regulator aligns with a THISDAY report last week, quoting secondary sources, that Nigeria had finally met its Organisation of Petroleum Exporting Countries (OPEC) quota, a feat that took a four-year struggle to achieve. 
• “The average crude oil production was 98.97 percent of OPEC quota, that is 1.5 million barrels per day,” a footnote on the December production data just released by the Upstream Petroleum Commission, stated. 
• In all, the data showed that when crude oil and condensate, which is excluded from OPEC computation, were combined for the December output circle, Nigeria’s total average liquids volume hit 1.667 million barrels per day last month. 
• In December, the NUPRC figures further showed that the country’s peak production on any day within the month was 1.79 million bpd, while the lowest was 1.57 million bpd. OFB’s 

Expert Opinion: Price Rise Expected Amid Reduced Russian and Iranian Output

• Oil prices reached their highest level in over three months, driven by concerns that U.S. sanctions on Russia could lower its oil output. Goldman Sachs suggested that Brent prices could rise above $85 per barrel if Russian production declines further.
• The bank also noted that prices might touch $90 per barrel if the drop in Russian output coincides with reduced production from Iran.