Oil prices are soaring this morning, with WTI hitting three month highs after reports that Indian oil refiners are bracing for new US sanctions that would hit flows from Russia.

“Additional sanctions against the Russian oil and insurance industry has added further fuel to the fire, as it raises the prospect for lower supply during a period of strong winter-related demand,” said Ole Hansen, head of commodities strategy at Saxo Bank.

While traders had tougher sanctions on their radar, the scale is considerably larger than expected. The tougher measures would target more than 180 tankers carrying Russian oil, as well as maritime insurance providers based in the country, Reuters said, citing Indian refining sources it didn’t identify.

WTI broke above its 200DMA - also driving an acceleration in price as CTAs jump on board the move...

Source: Bloomberg

The market has also been supported by dwindling US crude stockpiles, lower seaborne exports from Russia and cold weather.

"The cold spell in the US and Europe could disrupt supply if refiners are affected and demand for heating oil is naturally rising. Stock draws in distillates in the coming weeks cannot be ruled out. Sanction-related declines in Iranian and Russian crude oil exports force China to seek suitable alternatives," PVM Oil Associates noted.

Uncertainty over how aggressively the Trump administration will move to curtail Iranian crude flows is also providing support, they said.

Asian buyers have already been looking for alternative grades from the Middle East, with broader sanctions against Russia and Iran making this oil flow more difficult.

"Sentiment remains positive on the back of colder weather across parts of the Northern Hemisphere, which is likely to boost oil demand. In addition, spot Asian LNG (liquefied natural gas) is trading at a premium to oil, increasing the risk of substitution," Warren Patterson and Ewa Manthey, commodities strategists at ING, said in a note.

The additional sanctions also follow on this week's decision by a major Chinese port operator to ban sanctioned tankers from Russia and Iran.

With oil prices surging, look out above for pump prices...

Source: Bloomberg

Interesting that the Biden admin waited until now to get more aggressive on the anti-Russian sanctions... just in time for Trump's term to begin and reignite inflation fears.