Week in Review – Oil Prices Climb $5 as New Russia Sanctions Shake Up Global Supply

Oil prices are closing the week on a stronger note, climbing nearly $5 per barrel from last week's close as new sanctions on Russia trigger concerns about global supply. Brent crude is trading around $66 per barrel and West Texas Intermediate near $62, both up roughly 7% week-over-week, marking their biggest gains since mid-June. After dipping overnight, prices recovered Friday morning as the market refocused on tightening supply risks, with new measures from the U.S. and European Union shaking up global trade flows.

This week, the EU approved a new sanctions package targeting Russian energy infrastructure, including a full transaction ban on two of Russia's largest oil producers and restrictions on 117 vessels accused of supporting Moscow's "shadow fleet." In parallel, Washington issued its own sanctions on Rosneft and Lukoil, companies that together account for more than 5% of global oil output and about 45% of Russia's exports. Analysts estimate the two have shipped more than 3 million barrels per day of oil so far this year, meaning even modest disruptions could have major market effects. The sanctions prompted several Chinese state oil majors to suspend seaborne Russian oil purchases, while refiners in India are preparing to sharply reduce imports in the short term.

The reaction from Moscow was swift. President Vladimir Putin downplayed the economic impact of the sanctions, insisting that Russia's energy sector remains resilient. At the same time, he warned that a steep decline in exports would tighten global supply and "be uncomfortable" for countries like the United States. Despite his remarks, the sanctions have reintroduced a risk premium into oil markets, with traders moving away from worries of oversupply toward fears of potential shortages. The six-month Brent futures spread has flipped back into backwardation - where near-term contracts trade higher than later ones - signaling renewed concern about limited availability.

Adding another layer of complexity, tensions are rising between the EU and China. The EU included several Chinese refiners and trading firms in its latest sanctions round. In response, Beijing urged the EU to immediately reverse the decision, calling it "seriously damaging" to China-EU trade relations and a threat to global energy security. These diplomatic frictions come just a week before U.S. President Donald Trump is set to meet with Chinese President Xi Jinping. Trump said he hopes to extend a pause on new tariffs in exchange for Chinese concessions, hinting at a possible de-escalation in trade tensions that could eventually support global demand growth.

Meanwhile, OPEC members have signaled a readiness to stabilize the market if disruptions intensify. Kuwait's oil minister said the group could increase production if global demand requires it, a statement that helped ease fears of a severe shortage. Still, analysts from Goldman Sachs and HSBC noted that even with OPEC's flexibility, the new sanctions add upward pressure to prices. Goldman maintained its forecast that Brent and WTI will average $56 and $52 per barrel in 2026, but acknowledged that reduced Russian output could push prices higher in the short term.

Beyond geopolitics, broader economic indicators are also shaping sentiment. U.S. inflation edged up to 3% in September, slightly hotter than expected, and the dollar strengthened ahead of next week's Federal Reserve meeting. Fed officials remain divided over how far to cut rates, with some favoring more easing to support the labor market and others warning that too many cuts could rekindle inflation. The central bank is widely expected to deliver another 25-basis-point reduction, a move that could boost economic activity but may also lift oil demand if consumer spending accelerates.

At the same time, analysts remain cautious about long-term fundamentals. BMI Research noted that the long-anticipated supply glut may still emerge later this year unless the sanctions significantly disrupt exports. Absent major export losses from Russia, analysts expect prices to remain under pressure through early 2026 before recovering as demand strengthens and supply growth slows. Still, the sharp rebound this week shows how quickly sentiment can shift when geopolitical risk enters the picture.

Prices in Review

Crude prices climbed steadily throughout the week, with the largest gains occurring midweek. After a quiet start, edging up just $0.06 from Monday to Tuesday, prices surged by $1.73 on Wednesday and jumped another $2.93 on Thursday, marking the week's biggest single-day increase. Crude opened slightly higher on Friday at $61.81. Overall, the market gained $4.87 for the week, a rise of 8.55%.

Diesel prices saw an upward trend this week after a slight dip on Tuesday. Starting at $2.1846 on Monday, prices slipped to $2.1690 but then increased by $0.0841 on Wednesday and another $0.1156 on Thursday, the biggest single-day increase of the week. By Friday, diesel reached $2.3823, meaning a gain of $0.1977, or 9.05% for the week.

Gasoline prices moved up overall this week, despite a small dip on Tuesday. After starting at $1.8234 on Monday and briefly slipping to $1.7991, prices surged midweek, climbing by $0.0651 on Wednesday and another $0.0700 on Thursday, the week's biggest single-day gain. Prices held near that level into Friday, opening on Friday at $1.9247. In total, gasoline rose $0.1013, or 5.56%, from Monday to Friday.