Oil prices jump 5% after US sanctions target Russian oil companies

Oil prices jumped on Thursday after the U.S. imposed sanctions on major Russian oil companies over Russia’s war in Ukraine.

Brent crude futures were up 5%, while West Texas Intermediate crude futures climbed more than 5.2% as of Thursday morning.

The Trump administration on Wednesday moved to sanction Russia’s largest oil producers, Rosneft and Lukoil, over their role in funding the Russian war in Ukraine, which has become Europe’s biggest land war since World War II.

“Given President Putin’s refusal to end this senseless war, Treasury is sanctioning Russia’s two largest oil companies that fund the Kremlin’s war machine,” Treasury Secretary Scott Bessent said in a statement. “We encourage our allies to join us in and adhere to these sanctions.”

TRUMP ADMINISTRATION HITS RUSSIA’S TOP OIL FIRMS WITH SANCTIONS TO STUNT WAR FUNDING, URGES CEASEFIRE

The U.S. sanctioned major Russian oil companies that have helped finance Russian President Vladimir Putin’s war in Ukraine. (Mikhail Metzel/ Pool/AFP / Getty Images)

Russian oil and gas revenue, which is down 21% year-over-year, accounts for about one-fourth of Russia’s budget and is the government’s most important source of cash for the war in Ukraine. 

However, Russia’s revenue mainly comes from taxing output, rather than exports, which could lessen the immediate impact of the sanctions.

Ukrainian President Volodymyr Zeleneskyy thanked the U.S. for the new sanctions and said they were “very important” — though he noted that more pressure will be needed to convince Russia to agree to a ceasefire.

BESSENT WARNS ‘ALL OPTIONS ARE ON THE TABLE’ FOR RUSSIA SANCTIONS

Indian and Chinese oil firms and refineries may be forced to find alternative sources of oil due to the sanctions on Russia. (Hussein Faleh/AFP via Getty Images / Getty Images)

A spokeswoman for the Russian Foreign Ministry dismissed the impact of the oil sanctions, saying Russia has developed a “strong immunity” to sanctions.

Lukoil canceled a planned board meeting related to dividends and canceled it in response to “the new circumstances.”

GAS PRICES NEAR $3 MARK FOR FIRST TIME IN YEARS

China and India are Russia’s biggest oil clients. (Maxim Shipenkov/POOL/AFP via Getty Images / Getty Images)

The U.S. sanctions mean that refineries in China and India, countries which are major buyers of Russian oil, will need to find alternative suppliers to avoid being excluded from the Western banking system, according to Saxo Bank analyst Ole Hansen.

The Trump administration’s sanctions give companies until Nov. 21 to cut their transactions with the Russian oil producers.

Indian oil industry sources told Reuters that Indian refiners were poised to sharply curtail imports of Russian oil to comply with U.S. sanctions.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

Major Chinese state oil companies, including PetroChina, Sinopec, CNOOC and Zhenhua Oil, will refrain from buying Russian seaborne oil at least in the short-term due to the sanctions, Reuters reported citing multiple industry sources.

Reuters contributed to this report.