ANS breaks its fall

WTI, Brent each jump 5% Oct. 23 as U.S. heaps sanctions on Russian majors

Steve Sutherlin

for Petroleum News

Alaska North Slope crude broke a downward trend as it edged higher Oct. 21, up 14 cents to close at $63.35 per barrel -- $1.02 below its Oct. 14 close of $64.37 and $4.11 below its Oct. 7 close of $67.46.

West Texas Intermediate jumped 30 cents on Oct. 21 to close at $57.82, and Brent jumped 31 cents to close at $62.31. ANS closed at a $5.53 premium to WTI Oct. 21, and at a $1.04 premium to Brent.

The crude rally gathered steam on Oct. 22, seeing WTI rise 68 cents to close at $58.50, while Brent rose 28 cents to $62.59. The Oct. 22 ANS closing price was unavailable as Petroleum News went to press early morning on Oct. 23.

Oil prices rocketed even higher in Asian trade Oct. 23. WTI and Brent were each up more than 5%, reaching $61.79 and $65.97 respectively as Petroleum News went to press.

The United States imposed new sanctions Oct. 23 against Russia's oil industry out of frustration with lack of progress for peace in Russia's war on Ukraine.

President Trump has backed away from a planned summit with Russian President Vladimir Putin in Budapest.

The sanctions aim to hit Russian oil majors Lukoil and Rosneft and some three dozen subsidiaries.

The sanctions could prohibit foreign countries or companies from conducting business with the Russian oil companies, severing their ties with the international financial system.

"Now is the time to stop the killing and for an immediate cease-fire," Treasury Secretary Scott Bessent said. "Treasury is prepared to take further action if necessary to support President Trump's effort to end yet another war. We encourage our allies to join us in and adhere to these sanctions."

"For the first time during the tenure of the 47th President of the United States, Washington has decided to impose full blocking sanctions against Russian energy companies," Olga Stefanishyna, Ukraine ambassador to the United States said in comments reported by the Wall Street Journal. "This step follows numerous efforts to give Russia an opportunity to engage in genuine negotiations to end the war."

"This decision fully aligns with Ukraine's consistent position that peace can only be achieved through strength and by exerting maximum pressure on the aggressor using all available international instruments," Stefanishyna said.

"Foreign financial institutions that conduct or facilitate significant transactions or provide any service involving Russia's military-industrial base" also "run the risk of being sanctioned," the Treasury Department said in a notice released Oct. 22.

Prior to the sanction announcement, Trump said that India had agreed to curtail purchases of Russian crude as part of a proposed trade agreement.

India and the United States are closing in on a long-pending trade deal which could slash the current tariffs for Indian exports to 15-16% from a punishing 50%, according to three people aware of the matter, India media outlet Mint reported.

India may agree to gradually reduce its imports of Russian oil, the Mint sources said on condition of anonymity.

"The purchases had prompted a punitive levy of 25% on Indian exports, which is over and above the 25% reciprocal tariffs announced in April," Mint said.

Russia currently supplies 34% of India's crude imports, while some10% (by value) of India's current oil and gas needs are imported from the United States.

India is considering allowing ethanol imports while gradually reducing purchases of Russian oil, with Washington expected to extend concessions on energy trade in return, one of Mint's sources said, adding that India may not make a formal announcement but would "informally advise" state-run oil marketing companies to diversify crude sourcing towards the United States.

U.S. inventory action bullish

Total motor gasoline inventories were drawn down by 2.1 million barrels over the week to 216.7 million barrels -- slightly below the five-year average for the season, the EIA said. Distillate fuel inventories decreased by 1.5 million barrels last week to 115.6 million barrels -- 7% below the five-year average for the time of year.

The drop in U.S. supplies wasn't very big but it suggests overseas demand for U.S. crude and crude products is strong, according to Michael Lynch, president of Strategic Energy & Economic Research as quoted in a MarketWatch report.

That could be in reaction to disruptions to Russia's exports given ongoing attacks to its oil infrastructure by Ukraine, he said.

Separately, the U.S. Energy Department said Oct. 21 that it plans to buy 1 million barrels of crude oil for the SPR.

The SPR buyback makes sense given that oil prices have dropped so much, so it's a "bit of bargain hunting," said Matt Smith, lead U.S. analyst at Kpler, as reported by MarketWatch.

Smith said it is "interesting timing" that Saudi Arabia de facto leader Mohammed bin Salman will visit Trump in the United States in November.

Smith said the meeting likely signals that Trump "will do his bit for both Saudi and U.S. producers by lending a bit of support to prices via SPR purchases."