On October 23rd, international crude oil futures saw a sharp rise. The December contract for US WTI crude oil futures settled at $61.79 per barrel, up $3.29, or 5.6%. The December contract for Brent crude oil futures settled at $65.99 per barrel, up $3.40, or 5.4%. This was primarily due to the US government's announcement of sanctions against two major oil companies, Lukoil and Rosneft, triggering a panic-driven supply premium in the market.
According to CCTV News, on the 23rd local time, US Treasury Secretary Bensont announced that the US would impose sanctions on Russia's two largest oil companies, Lukoil and Rosneft, and urged an immediate ceasefire between Russia and Ukraine. Meanwhile, the European Union had just passed its 19th round of sanctions against Russia. On the 22nd, EU member states reached an agreement on the 19th round of sanctions against Russia. It is reported that the sanctions include a ban on imports of Russian liquefied natural gas.
The news triggered a sharp drop in oil prices, with both WTI and Brent crude surging by over 5%. Market analysts predict that the US sanctions on major Russian oil producers will have a significant impact on market supply. On the one hand, there is a risk of a decline in Russian supply. Furthermore, this will incentivize major Asian oil consumers to shift their import sources, increasing purchases from the Middle East, Africa, and South America, further disrupting the supply-demand balance.
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US stocks generally closed higher on Thursday, with the Dow Jones Industrial Average up 0.31%, the S&P 500 up 0.58%, and the Nasdaq up 0.89%. Traders are also focused on the new US sanctions and CPI data. Friday's release of the US Consumer Price Index (CPI) for September is expected to show a 0.4% month-over-month increase in the headline CPI and a 0.3% increase in the core CPI. However, the market generally expects this inflation data will not prevent the Federal Reserve from cutting interest rates by 25 basis points for the second consecutive time. Overall, the macroeconomic environment remains favorable for crude oil.
Furthermore, in response to the impact of US sanctions on major Russian oil producers, oil-producing nation OPEC is preparing to increase production to offset market shortages. Kuwaiti Oil Minister Tariq Al-Roumi stated on Thursday that OPEC is prepared to increase crude oil production by further lifting production cuts, if necessary, to address the anticipated market shortages caused by the sanctions.
SunSirs crude oil analysts believe that, at present, the new US sanctions on Russian oil will have a significant impact on oil prices, further increasing the risk premium. However, as the market digests the news, crude oil will return to supply and demand fundamentals. The future market supply structure remains stable. OPEC has been increasing production, which has kept oil prices hovering at low levels. OPEC still has room to increase production capacity, and OPEC's production adjustments will play a significant role in stabilizing oil prices. On the demand side, the market generally expects future demand to remain conservative, indicating that the supply and demand structure will not undergo major changes. Taking all these factors into consideration, crude oil prices are likely to remain range-bound in the future.
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