Oil prices ease after sharp rally as US sanctions on Russia stir supply concerns  

SINGAPORE: Oil prices slipped in early trade on Friday, giving up part of the strong gains from a day earlier but staying on course for their biggest weekly rise since mid-June. The market remained volatile as new US sanctions on Russia’s two largest oil producers raised fears of tighter global supply.  

At 0200 GMT, Brent crude futures were down 54 cents, or 0.8 percent, to $65.45 a barrel, while US West Texas Intermediate (WTI) crude dropped 51 cents, or 0.8 percent, to $61.28. Both benchmarks had soared more than 5 percent on Thursday and were set for a weekly gain of around 7 percent.  

Fresh sanctions unsettle markets  

The slide followed a dramatic day in energy markets after Washington announced new sanctions on Russia’s state-run Rosneft and privately held Lukoil. Together, the two companies produce over 5 percent of the world’s oil. The move, part of US efforts to pressure Moscow over its war in Ukraine, drew a fiery response from Russian President Vladimir Putin, who dismissed the sanctions as hostile but insisted they would not significantly harm Russia’s economy.  

The ripple effects of the sanctions were swift. Chinese state oil firms reportedly halted short-term purchases of Russian crude, while Indian refiners—the biggest buyers of seaborne Russian oil—were said to be preparing steep cuts to imports.  

“Buying activity driven by fears of supply shortages has eased,” said Satoru Yoshida, a commodities analyst at Rakuten Securities. He added that with OPEC holding spare capacity, prices were unlikely to sustain a one-way rally. Yoshida expects WTI to trade roughly within a $5 range above or below $65.  

OPEC signals readiness to respond  

Kuwait’s oil minister said the Organisation of the Petroleum Exporting Countries was prepared to act if markets faced a shortfall, suggesting that output cuts could be rolled back to stabilise supply.  

The United States, meanwhile, said it was ready to impose further measures against Moscow. The UK and the European Union have already followed suit, with Britain sanctioning Rosneft and Lukoil last week. The EU’s latest package of restrictions—its 19th since the war began—includes a ban on imports of Russian liquefied natural gas and sanctions against two Chinese refiners and a PetroChina trading arm accused of aiding Russian oil exports.  

According to US energy data, Russia was the world’s second-largest oil producer in 2024, trailing only the United States.  

Global attention turns to US-China meeting  

Beyond the sanctions drama, investors are watching developments between Washington and Beijing. US President Donald Trump and Chinese President Xi Jinping are expected to meet next week amid growing trade tensions between the two economic giants. The confirmation of the meeting has brought a slight sense of relief to markets hoping for a thaw in relations.  

Despite the current pullback, analysts say oil prices remain underpinned by geopolitical risk and the uncertain outlook for Russian exports. With traders weighing sanctions, OPEC’s response, and upcoming diplomatic talks, volatility in the oil market is likely to persist into the coming week.