Oil stocks and funds, including the United States Oil Fund ETF (USO), rallied as crude prices hit a fresh four-month high following a tougher round of U.S. sanctions aimed at stemming the flood of Russian exports.
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Crude prices extended gains on Monday, January 13th, for a third straight session, with Brent rising above $80 a barrel to reach its highest point in over four months, while West Texas Intermediate (WTI) (CM:CL) hovered close to $78.
The surge in oil prices was sparked on Friday when the White House unveiled tougher new sanctions to curb Russian exports to China and India, with backing from the UK. These sanctions target Russian oil producers and exporters Gazprom Neft and Surgutneftegas, as well as more than two dozen of their subsidiaries.
Additionally, 183 tankers—part of the so-called “shadow fleet” of Russian vessels used to skirt Western insurers—have also been targeted.
Rising crude prices spilled over into higher stock prices, with USO up over 4% on Friday as oil stocks, including Chevron (CVX), rallied. European oil majors Shell (SHEL) and BP (BP) opened higher on Monday as the rally continued.
Sanctions Give Trump More Leverage, Says JPM
Analysts at JPMorgan (JPM) said the move by the outgoing Biden administration potentially gives Donald Trump more leverage to deal with Russia, noting that he could use the potential lifting of sanctions to pressure the Kremlin into agreeing to peace terms with Ukraine.
However, they cautioned that the underlying assumption remains for Trump to enact policies that keep oil prices low.
“We continue to believe that with U.S. oil supply growth moderating and GCC countries unlikely to offset lost Iranian, Venezuelan, or Russian output, any policies that might raise oil prices will likely take a backseat to Trump’s key objective of maintaining low energy prices,” the analysts at JPM said in a note seen by Investing.com.
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